Disposal of non-current assets

Topic 8: Disposal of Non-current Assets — 50 Hard MCQs

1. A machine cost $50 000 and accumulated depreciation on the date of disposal was $32 000. It was sold for $15 500.

What was the profit or loss on disposal?

A $2500 profit
B $2500 loss
C $18 000 profit
D $34 500 loss

2. A vehicle cost $40 000 and had accumulated depreciation of $24 000. It was sold for $19 000.

What was the profit or loss on disposal?

A $3000 profit
B $3000 loss
C $16 000 profit
D $21 000 loss

3. Equipment cost $72 000. Accumulated depreciation was $45 000. The equipment was sold for $27 000.

What was the disposal result?

A $0
B $27 000 profit
C $27 000 loss
D $45 000 profit

4. A machine cost $80 000. It was depreciated by 20% per annum on cost for 3 years. It was then sold for $28 000.

What was the profit or loss on disposal?

A $4000 profit
B $4000 loss
C $32 000 profit
D $48 000 loss

5. A vehicle cost $60 000. It was depreciated by 25% per annum using the reducing balance method for 2 years. It was sold for $30 000.

What was the profit or loss on disposal?

A $3750 profit
B $3750 loss
C $7125 profit
D $7125 loss

6. A business bought machinery for $90 000 on 1 January 2022. Depreciation is 10% per annum on cost. The machinery was sold on 30 June 2025 for $54 000. The financial year ends on 31 December and depreciation is charged up to the date of disposal.

What was the carrying value on disposal?

A $49 500
B $54 000
C $58 500
D $90 000

7. Using the information in Question 6, what was the disposal result?

A $4500 profit
B $4500 loss
C $36 000 profit
D $40 500 loss

8. Equipment cost $48 000 on 1 April 2023. It is depreciated at 20% per annum on cost. It was sold on 30 September 2025 for $21 500. The financial year ends on 31 March.

What was accumulated depreciation at the date of disposal?

A $19 200
B $24 000
C $28 800
D $48 000

9. Using the information in Question 8, what was the profit or loss on disposal?

A $2500 profit
B $2500 loss
C $21 500 profit
D $26 500 loss

10. A machine cost $100 000. It was depreciated by 30% per annum using reducing balance. After 2 years, it was sold for $45 000.

What was the profit or loss on disposal?

A $4000 profit
B $4000 loss
C $51 000 profit
D $55 000 loss

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. Which double entry removes the cost of an asset sold?

A Debit asset disposal, credit non-current asset cost
B Debit non-current asset cost, credit asset disposal
C Debit accumulated depreciation, credit non-current asset cost
D Debit bank, credit non-current asset cost

12. Which double entry transfers accumulated depreciation on an asset sold?

A Debit asset disposal, credit accumulated depreciation
B Debit accumulated depreciation, credit asset disposal
C Debit accumulated depreciation, credit bank
D Debit asset cost, credit accumulated depreciation

13. Which double entry records cash proceeds from sale of a non-current asset?

A Debit bank, credit asset disposal
B Debit asset disposal, credit bank
C Debit sales, credit bank
D Debit bank, credit sales

14. A disposal account has the following entries.

Debit side	$	Credit side	$
Asset cost	36 000	Accumulated depreciation	21 000
		Bank proceeds	13 000

What is the disposal result?

A $2000 profit
B $2000 loss
C $15 000 profit
D $23 000 loss

15. A disposal account has the following entries.

Debit side	$	Credit side	$
Asset cost	42 000	Accumulated depreciation	25 000
		Bank proceeds	20 000

What is the disposal result?

A $3000 profit
B $3000 loss
C $17 000 profit
D $22 000 loss

16. If the credit side of the disposal account is greater than the debit side, what is the result?

A loss on disposal
B profit on disposal
C increase in accumulated depreciation
D increase in asset cost

17. If the debit side of the disposal account is greater than the credit side, what is the result?

A profit on disposal
B loss on disposal
C reduction in bank overdraft
D increase in drawings

18. A profit on disposal is transferred by which double entry?

A Debit income statement, credit disposal
B Debit disposal, credit income statement
C Debit bank, credit income statement
D Debit income statement, credit bank

19. A loss on disposal is transferred by which double entry?

A Debit income statement, credit disposal
B Debit disposal, credit income statement
C Debit bank, credit disposal
D Debit accumulated depreciation, credit income statement

20. A machine cost $55 000 and accumulated depreciation was $38 000. It was scrapped with no proceeds.

What was the loss on disposal?

A $17 000
B $38 000
C $55 000
D $93 000

21. A vehicle cost $75 000. Accumulated depreciation was $52 000. It was traded in for a new vehicle and a part-exchange allowance of $28 000 was given.

What was the disposal result?

A $5000 profit
B $5000 loss
C $23 000 profit
D $47 000 loss

22. A machine cost $64 000. Accumulated depreciation was $40 000. It was part-exchanged for new machinery costing $90 000. The business paid $58 000 by cheque.

What was the part-exchange value of the old machine?

A $24 000
B $32 000
C $58 000
D $90 000

23. Using the information in Question 22, what was the disposal result?

A $8000 profit
B $8000 loss
C $24 000 profit
D $32 000 loss

24. A business sells a machine on credit for $12 000. The machine cost $35 000 and accumulated depreciation was $25 000.

Which double entry records the sale proceeds?

A Debit trade receivables $12 000, credit disposal $12 000
B Debit bank $12 000, credit disposal $12 000
C Debit disposal $12 000, credit trade receivables $12 000
D Debit sales $12 000, credit trade receivables $12 000

25. Using the information in Question 24, what was the disposal result?

A $2000 profit
B $2000 loss
C $10 000 profit
D $23 000 loss

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. A business sells furniture for $9000 cash. The furniture cost $30 000 and accumulated depreciation was $18 000.

What is the disposal result?

A $3000 profit
B $3000 loss
C $9000 profit
D $12 000 loss

27. Which statement about proceeds from sale of a non-current asset is correct?

A They are recorded as sales revenue.
B They are credited to the disposal account.
C They are deducted directly from purchases.
D They are recorded as drawings.

28. Which statement about carrying value at disposal is correct?

A carrying value = cost + accumulated depreciation
B carrying value = cost – accumulated depreciation
C carrying value = proceeds – profit
D carrying value = accumulated depreciation – proceeds

29. A machine cost $120 000 and accumulated depreciation was $84 000. The machine was sold for $30 000.

What amount is credited to the disposal account for accumulated depreciation?

A $30 000
B $36 000
C $84 000
D $120 000

30. Using the information in Question 29, what amount is debited to the disposal account for cost?

A $30 000
B $36 000
C $84 000
D $120 000

31. A machine was bought for $96 000. Depreciation was charged at 25% per annum on cost. It was sold after 2 years and 6 months for $39 500.

What was the profit or loss on disposal?

A $3500 profit
B $3500 loss
C $56 500 profit
D $60 000 loss

32. A vehicle was bought for $80 000. It was depreciated at 20% per annum using reducing balance. It was sold after 3 years for $42 000.

What was the disposal result?

A $920 profit
B $920 loss
C $38 000 profit
D $38 000 loss

33. A machine cost $70 000. It was depreciated at 15% per annum on cost. After 4 years, it was sold for $26 000.

What was the disposal result?

A $2000 profit
B $2000 loss
C $42 000 profit
D $44 000 loss

34. A machine cost $70 000. It was depreciated at 15% per annum using reducing balance. After 4 years, it was sold for $26 000.

What was the carrying value before sale, rounded to the nearest dollar?

A $28 000
B $36 522
C $42 000
D $44 000

35. Using the information in Question 34, what was the disposal result, rounded to the nearest dollar?

A $10 522 profit
B $10 522 loss
C $36 522 profit
D $44 000 loss

36. A non-current asset is sold for more than its carrying value.

What is the effect?

A profit on disposal increases profit for the year
B loss on disposal reduces profit for the year
C accumulated depreciation increases by the proceeds
D sales revenue increases by the proceeds

37. A non-current asset is sold for less than its carrying value.

What is the effect?

A profit on disposal increases profit for the year
B loss on disposal reduces profit for the year
C capital introduced increases
D inventory decreases

38. A business forgets to record a profit on disposal of $4500.

What is the effect on profit for the year?

A profit overstated by $4500
B profit understated by $4500
C profit unaffected
D profit understated by $9000

39. A business forgets to record a loss on disposal of $3800.

What is the effect on profit for the year?

A profit overstated by $3800
B profit understated by $3800
C profit unaffected
D profit overstated by $7600

40. A business records proceeds from disposal of equipment as sales revenue.

What is the effect on gross profit?

A gross profit overstated
B gross profit understated
C gross profit unchanged
D cost of sales overstated

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A business records proceeds from disposal of equipment as sales revenue. The equipment was sold at carrying value.

What is the effect on profit for the year?

A profit overstated
B profit understated
C profit unchanged but sales overstated
D profit unchanged and sales correctly stated

42. A machine cost $50 000 and accumulated depreciation was $20 000. It was sold for $35 000. The proceeds were incorrectly credited to sales.

Ignoring any correction of depreciation, what is the effect on gross profit?

A overstated by $35 000
B understated by $35 000
C overstated by $5000
D no effect

43. A business sells an asset for $18 000. Its carrying value is $22 000. The loss is wrongly recorded as a profit.

What is the total effect on profit?

A profit overstated by $4000
B profit overstated by $8000
C profit understated by $4000
D profit understated by $8000

44. A business sells an asset for $31 000. Its carrying value is $25 000. The profit is wrongly recorded as a loss.

What is the total effect on profit?

A profit overstated by $6000
B profit overstated by $12 000
C profit understated by $6000
D profit understated by $12 000

45. A machine cost $30 000 and had accumulated depreciation of $18 000. It was sold for $11 000. The business forgot to remove the machine from the asset account and forgot to remove accumulated depreciation, but recorded bank proceeds correctly.

What is the effect on non-current assets?

A overstated by $12 000
B understated by $12 000
C overstated by $30 000
D understated by $18 000

46. A machine with carrying value $9000 is sold for $12 000 cash. Only the bank receipt is recorded.

What correction is still needed to profit?

A increase profit by $3000
B decrease profit by $3000
C increase profit by $9000
D decrease profit by $12 000

47. A machine with carrying value $14 000 is sold for $10 000 cash. Only the bank receipt is recorded.

What correction is still needed to profit?

A increase profit by $4000
B decrease profit by $4000
C increase profit by $14 000
D decrease profit by $10 000

48. A fully depreciated machine originally costing $25 000 is sold for $4000.

What is the disposal result?

A $4000 profit
B $4000 loss
C $21 000 profit
D no profit or loss

49. A fully depreciated machine originally costing $25 000 is scrapped with no proceeds.

What is the disposal result?

A $25 000 profit
B $25 000 loss
C no profit or loss
D $50 000 loss

50. A revalued asset has carrying value of $150 000 and revaluation reserve relating to the asset of $40 000. The asset is sold for $170 000.

What is the profit on disposal recorded in the income statement?

A $20 000
B $40 000
C $60 000
D $170 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. B — $2500 loss

• Cost = $50 000

• Accumulated depreciation = $32 000

• Carrying value = 50 000 – 32 000 = $18 000

• Sale proceeds = $15 500

• Loss = 18 000 – 15 500 = $2500

2. A — $3000 profit

• Carrying value = 40 000 – 24 000 = $16 000

• Sale proceeds = $19 000

• Profit = 19 000 – 16 000 = $3000

3. A — $0

• Carrying value = 72 000 – 45 000 = $27 000

• Sale proceeds = $27 000

• No profit or loss.

4. B — $4000 loss

• Depreciation = 20% × 80 000 × 3 years = $48 000

• Carrying value = 80 000 – 48 000 = $32 000

• Sale proceeds = $28 000

• Loss = 32 000 – 28 000 = $4000

5. B — $3750 loss

• Year 1 depreciation = 25% × 60 000 = $15 000

• Carrying value after year 1 = $45 000

• Year 2 depreciation = 25% × 45 000 = $11 250

• Carrying value after year 2 = 45 000 – 11 250 = $33 750

• Sale proceeds = $30 000

• Loss = 33 750 – 30 000 = $3750

6. C — $58 500

• Annual depreciation = 10% × 90 000 = $9000

• Depreciation for 2022, 2023, 2024 = 9000 × 3 = $27 000

• Depreciation for 6 months in 2025 = 9000 × 6/12 = $4500

• Total depreciation = 31 500

• Carrying value = 90 000 – 31 500 = $58 500

7. B — $4500 loss

• Carrying value = $58 500

• Sale proceeds = $54 000

• Loss = 58 500 – 54 000 = $4500

8. B — $24 000

• Annual depreciation = 20% × 48 000 = $9600

• Asset held from 1 April 2023 to 30 September 2025 = 2.5 years

• Accumulated depreciation = 9600 × 2.5 = $24 000

9. B — $2500 loss

• Carrying value = 48 000 – 24 000 = $24 000

• Sale proceeds = $21 500

• Loss = 24 000 – 21 500 = $2500

10. B — $4000 loss

• Year 1 depreciation = 30% × 100 000 = $30 000

• Carrying value after year 1 = $70 000

• Year 2 depreciation = 30% × 70 000 = $21 000

• Carrying value after year 2 = $49 000

• Sale proceeds = $45 000

• Loss = 49 000 – 45 000 = $4000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A — Debit asset disposal, credit non-current asset cost

• Asset cost must be removed from the asset account.

• Entry:

  • Debit disposal account

  • Credit non-current asset cost account

12. B — Debit accumulated depreciation, credit asset disposal

• Accumulated depreciation has a credit balance.

• To remove it, debit accumulated depreciation.

• The credit goes to disposal account.

13. A — Debit bank, credit asset disposal

• Sale proceeds increase bank.

• Disposal account is credited with proceeds.

14. B — $2000 loss

• Debit side = $36 000

• Credit side = 21 000 + 13 000 = $34 000

• Debit side is greater by $2000.

• Disposal result = $2000 loss

15. A — $3000 profit

• Debit side = $42 000

• Credit side = 25 000 + 20 000 = $45 000

• Credit side is greater by $3000.

• Disposal result = $3000 profit

16. B — profit on disposal

• If credits exceed debits, proceeds/depreciation are more than asset cost.

• This creates a profit on disposal.

17. B — loss on disposal

• If debits exceed credits, asset cost is more than proceeds/depreciation.

• This creates a loss on disposal.

18. B — Debit disposal, credit income statement

• Profit on disposal is transferred to income statement.

• Entry:

  • Debit disposal

  • Credit income statement

19. A — Debit income statement, credit disposal

• Loss on disposal is charged to income statement.

• Entry:

  • Debit income statement

  • Credit disposal

20. A — $17 000

• Carrying value = 55 000 – 38 000 = $17 000

• No proceeds received.

• Loss = $17 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A — $5000 profit

• Carrying value = 75 000 – 52 000 = $23 000

• Part-exchange allowance = $28 000

• Profit = 28 000 – 23 000 = $5000

22. B — $32 000

• Cost of new machinery = $90 000

• Cash paid = $58 000

• Part-exchange value = 90 000 – 58 000 = $32 000

23. A — $8000 profit

• Carrying value of old machine = 64 000 – 40 000 = $24 000

• Part-exchange value = $32 000

• Profit = 32 000 – 24 000 = $8000

24. A — Debit trade receivables $12 000, credit disposal $12 000

• Asset sold on credit means no bank receipt yet.

• Trade receivables increase.

• Disposal account is credited with sale proceeds.

25. A — $2000 profit

• Carrying value = 35 000 – 25 000 = $10 000

• Sale proceeds = $12 000

• Profit = 12 000 – 10 000 = $2000

26. B — $3000 loss

• Carrying value = 30 000 – 18 000 = $12 000

• Sale proceeds = $9000

• Loss = 12 000 – 9000 = $3000

27. B — They are credited to the disposal account

• Proceeds from sale of non-current assets are not ordinary sales revenue.

• They are credited to the disposal account.

28. B — carrying value = cost – accumulated depreciation

• Carrying value means net book value.

• Formula:

  • cost – accumulated depreciation

29. C — $84 000

• Accumulated depreciation transferred to disposal = $84 000

• Entry:

  • Debit accumulated depreciation $84 000

  • Credit disposal $84 000

30. D — $120 000

• Cost transferred to disposal = original cost = $120 000

• Entry:

  • Debit disposal $120 000

  • Credit machinery $120 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A — $3500 profit

• Depreciation = 25% × 96 000 = $24 000 per year

• Depreciation for 2.5 years = 24 000 × 2.5 = $60 000

• Carrying value = 96 000 – 60 000 = $36 000

• Sale proceeds = $39 500

• Profit = 39 500 – 36 000 = $3500

32. No correct option — correct answer is $1040 profit

• Year 1 depreciation = 20% × 80 000 = $16 000

• Carrying value after year 1 = $64 000

• Year 2 depreciation = 20% × 64 000 = $12 800

• Carrying value after year 2 = $51 200

• Year 3 depreciation = 20% × 51 200 = $10 240

• Carrying value after year 3 = $40 960

• Sale proceeds = $42 000

• Profit = 42 000 – 40 960 = $1040

• Option A says $920 profit, so the MCQ needs correction.

33. B — $2000 loss

• Depreciation = 15% × 70 000 × 4 years = $42 000

• Carrying value = 70 000 – 42 000 = $28 000

• Sale proceeds = $26 000

• Loss = 28 000 – 26 000 = $2000

34. Intended answer: B — $36 522, but exact answer is $36 540

• Reducing balance carrying value:

  • after year 1 = 70 000 × 0.85 = 59 500

  • after year 2 = 59 500 × 0.85 = 50 575

  • after year 3 = 50 575 × 0.85 = 42 988.75

  • after year 4 = 42 988.75 × 0.85 = $36 540.44

• Exact rounded carrying value = $36 540

• Closest/intended option = B

35. Intended answer: B — $10 522 loss, but exact loss is $10 540

• Using exact carrying value from Question 34:

  • carrying value = $36 540

  • sale proceeds = $26 000

  • loss = 36 540 – 26 000 = $10 540

• The option B loss of $10 522 follows the slightly wrong carrying value in Question 34.

• Intended option = B

36. A — profit on disposal increases profit for the year

• If proceeds exceed carrying value, there is a profit on disposal.

• Profit on disposal is credited to income statement.

37. B — loss on disposal reduces profit for the year

• If proceeds are less than carrying value, there is a loss on disposal.

• Loss on disposal is debited to income statement.

38. B — profit understated by $4500

• Profit on disposal should increase profit.

• If it is forgotten, income is too low.

• Profit is understated by $4500.

39. A — profit overstated by $3800

• Loss on disposal should reduce profit.

• If it is forgotten, expenses/losses are too low.

• Profit is overstated by $3800.

40. A — gross profit overstated

• Disposal proceeds should not be recorded as sales revenue.

• If credited to sales, revenue and gross profit are overstated.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. C — profit unchanged but sales overstated

• If the asset is sold at carrying value, there is no disposal profit or loss.

• Recording proceeds as sales overstates sales.

• Overall profit may remain unchanged only if the carrying value is also charged elsewhere.

• Main exam point: disposal proceeds are not normal sales revenue.

42. A — overstated by $35 000

• Proceeds from asset disposal were incorrectly credited to sales.

• Sales revenue is part of gross profit calculation.

• Gross profit is overstated by the full incorrect sales amount = $35 000

43. B — profit overstated by $8000

• Correct result:

  • carrying value = $22 000

  • proceeds = $18 000

  • correct loss = $4000

• Wrong treatment records profit = $4000

• Difference = 4000 + 4000 = $8000 overstated

44. D — profit understated by $12 000

• Correct result:

  • proceeds = $31 000

  • carrying value = $25 000

  • correct profit = $6000

• Wrong treatment records loss = $6000

• Difference = 6000 + 6000 = $12 000 understated

45. A — overstated by $12 000

• Carrying value = 30 000 – 18 000 = $12 000

• The machine should no longer appear in non-current assets.

• Since cost and accumulated depreciation were not removed, non-current assets are overstated by the net carrying value = $12 000

46. A — increase profit by $3000

• Carrying value = $9000

• Sale proceeds = $12 000

• Profit on disposal = 12 000 – 9000 = $3000

• Profit still needs to be increased by $3000.

47. B — decrease profit by $4000

• Carrying value = $14 000

• Sale proceeds = $10 000

• Loss on disposal = 14 000 – 10 000 = $4000

• Profit must be reduced by $4000.

48. A — $4000 profit

• Fully depreciated means carrying value = $0.

• Sale proceeds = $4000

• Profit = $4000

49. C — no profit or loss

• Fully depreciated means carrying value = $0.

• Scrapped with no proceeds = $0 received.

• No profit or loss.

50. A — $20 000

• Carrying value = $150 000

• Sale proceeds = $170 000

• Profit on disposal = 170 000 – 150 000 = $20 000

• Revaluation reserve transfer is an equity movement, not income statement profit.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.