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A business has a policy of capitalizing expenditure over £500.You are working on the accounting...

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Accounting

A business has a policy of capitalizing expenditure over £500.

You are working on the accounting records of a business for the year ended 31 March 2019.
A machine was acquired on 1 April 2016.

The cost was £12,500; this was paid from the bank.

Machines are depreciated at 30% per annum on the diminishing balance basis, with a full year's charge in the year of acquisition and none in the year of disposal.

On 30 September 2018, the asset was sold for £6,000.

Required:

a.   Calculate the gain or loss on disposal of the machine.

b.   For each year make entries in the relevant accounts and clearly show the balance to be carried down or transferred to the statement of profit or loss as appropriate.

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