A company depreciates its equipment at the rate of 20 per cent per annum using the

straight line method, for each month of ownership.

20X4 Bought equipment costing $900 on 1 January

Bought equipment costing $600 on 1 October

20x5 No purchase or sale of equipment

20X6 Bought equipment costing $550 on 1 July

20X7 Sold equipment which cost $900 which was bought on 1 January 20X4 for

$275 on 30 September 20X7

The accounting year ended on 31 December each year.

Required:

(a) Draw up the equipment account and the provision for depreciation equipment account for years 20x4, 20x5, 20x6, and 20x7.

(b) What is the profit or loss on the disposal of equipment sold on 30 September 20x7?