unit 5 p/x costs

inq80

Hi,

I need some help on a disposal question which involves a part exchange. I've searched the forum and couldnt find an answer anywhere...

I'm doing the practice simulation provided by my distant learning provider and cant follow the question about disposals. The practice mentions vat on both the new purchase and vat on the old part exchange. The tutor book i got from the course provider doesnt mention in it's examples what to do with vat?

If a new item was purchased for £25000 + vat (£4375) & against this cost, the part exchange (£4000 + vat (£700))was deducted to give you the final invoice total, what figures do you post?

The emails i've received and book i've got just mention full costs to be posted.

Is the full cost of the part exchange considered to be £4000 or £4700?

When posting the final costs for the new item, do you deduct £4000 or £4700 for the p/x from the total + the £4375 for vat?

any advice would be great.

thanks

sdv

read the situation of the simulation and make sure that the company can recover the VAT. if so then

apply ssap 5 - revenue and costs of the company excludes VAT

therefore in your calculations for the purchase of new asset, it will be net of Vat (£25,000) and the sale proceeds in your disposal a/c will exclude the vat (£4,000)

I hope this helps

inq80

thanks for the tip sdv - doesnt help when the training book your provided doesnt even mention vat...