Practice Assessment 2 Question 1.9

Sentinel
Sentinel Registered Posts: 9 New contributor 🐸
Hi, im confused on how to get the answer for this question. I used the restricted method (5/3 x (proceeds - 6000), but the answer is still wrong.


Comments

  • skandwm15
    skandwm15 Registered Posts: 16 New contributor 🐸
    You calculate the gain as normal, but it cannot exceed the 5/3 method:

    Painting £4,000 + Auctioneers Fees £80 (£4,000 x 2%) + Restorers Fees £500 = £4,580
    £8,500 - £4,580 = £3,920

    Using the 5/3 method it would be £8,500 - £6,000 = (2,500 / 3 ) x 5 = £4,167

    As the gain doesn't exceed the 5/3 method, you go with the amount using the normal method.
  • Sentinel
    Sentinel Registered Posts: 9 New contributor 🐸
    skandwm15 said:

    You calculate the gain as normal, but it cannot exceed the 5/3 method:

    Painting £4,000 + Auctioneers Fees £80 (£4,000 x 2%) + Restorers Fees £500 = £4,580
    £8,500 - £4,580 = £3,920

    Using the 5/3 method it would be £8,500 - £6,000 = (2,500 / 3 ) x 5 = £4,167

    As the gain doesn't exceed the 5/3 method, you go with the amount using the normal method.

    thank you
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