A computer set bought for #150,000 was disposed for #45,000 after some years of use. The profit on disposal was #7,500. Accumulated depreciation at the time...

When a fixed asset is disposed of, the profit or loss on disposal is the difference between the disposal proceeds and the asset's net book value (NBV) at the time of disposal, where the net book value is what remains of the original cost after accumulated depreciation has been deducted.

1. Find the net book value at disposal. Since the disposal produced a profit, the proceeds exceeded the net book value by the amount of that profit: \[ \text{NBV} = \text{Disposal proceeds} - \text{Profit on disposal} = \#45{,}000 - \#7{,}500 = \#37{,}500 \]
2. Find the accumulated depreciation by subtracting the net book value from the original cost: \[ \text{Accumulated depreciation} = \text{Cost} - \text{NBV} = \#150{,}000 - \#37{,}500 = \#112{,}500 \]

The accumulated depreciation at the time of disposal was therefore #112,500. A frequent mistake is to subtract the disposal proceeds directly from the cost without first accounting for the profit, which skips the step of finding the true net book value and produces the wrong figure.

Examination reminder: on a disposal question, always establish the net book value first by adjusting the proceeds for the stated profit or loss, then subtract that net book value from the original cost to find accumulated depreciation.