Accounting Online Program Certification Practice Test

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Prepare for the Accounting Online Program Certification Test. Use flashcards and multiple choice questions with detailed explanations. Ace your accounting certification exam with confidence!

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What profit did Exe plc realise upon disposal of the old machine?

£2,440
£3,000
£2,000
£3,400

The correct answer is: £2,440

To determine the profit that Exe plc realized upon the disposal of the old machine, it's essential to consider both the selling price of the machine and its carrying value (the book value at the time of disposal). The profit on disposal is calculated by subtracting the carrying value from the selling price. If the correct answer is £2,440, it indicates that the selling price exceeded the carrying value by that amount. For example, if the old machine was sold for £6,440 and had a carrying value of £4,000, the profit would be determined as follows: Profit on disposal = Selling Price – Carrying Value Profit on disposal = £6,440 – £4,000 = £2,440 This calculation reflects a straightforward approach to understanding the financial outcome of the disposal. It’s crucial to realize that the correct choice logically stems from verifying both figures involved in the calculation of profit on disposal. This ensures students grasp the fundamental accounting concepts surrounding asset disposals, making it a core component of financial decision-making in a business context.