Gunter’s business sells an item of machinery for £2660 on 30 June 20X6. The balances at the beginning of the accounting year (1 January 20X6) for the asset were: cost = £17 700; accumulated depreciation = £15 930.

Gunter charges depreciation on this class of asset at the rate of 10% per annum on cost, with a month's depreciation charged for each full month of ownership in the year of disposal. He has assumed a nil residual value for this asset.

Two of the following eight statements are correct:

1. Profits decrease by £890.

2 Profits increase by £890.

3) Profits increase by £1775.

4 Profits decrease by £1775.

5. Cash increases by £2660.

6 Cash increases by £1775.

7. Cash decreases by £2660.

8. Cash decreases by £1775.

Which statements are correct?

a) land7

b) 4and6

c) 2and8

d) 3and5.