For the business we have previously looked at let us now consider an item of machinery sold in 2009. Machinery details are:
Item 1 Purchased 2006 £3,200 (net of VAT).
Item 2 Purchased 2007 £1,600 (net of VAT).
Depreciation: 10% straight line.
The T accounts will show the figures brought forward in 2009.
(cost = £4,800; accumulated depreciation = 3,200 x 10% x 3 + £1,600 x 10% x 2 = £1,280)
You will then be asked to complete the entries in 2009 when Item 1 was sold.