A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car?
Correct answer: A. 20,000 Loss
- A. 20,000 Loss
- B. 20,000 Profit
- C. 10,000 Loss
- D. 10,000 Profit
Explanation
Under SLM, annual depreciation is 10% of 200,000, or 20,000; two years reduce the book value to 160,000. Sale at 140,000 gives a loss of 20,000.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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