PTC - Chattles - restricting the gain

sarah_d
sarah_d Registered Posts: 10 New contributor 🐸
in AAT Level 4 (Level 8 in Scotland)
i have done a past paper today, and either i am being really stupid or well, i just don't know

Non wasting chattles....Dec 08 paper

sold a painting for 60000 originally bought for £5000. spent £800 cleaning it and £4500 having it re framed

Restrict the gain

5/3(gross proceeds-6000)

5/3(60,000-6,000) = £90,000

How can the gain be more than the proceeds??

This is driving me crazy, i have check the fraction time and time again in my study notes, thinking surely it must be 3/5 giving £32400 but it deff says 5/3

Or is it the lower of gain or ristriction?

Arrrghhh driving me crazy!!

Comments

  • Richard
    Richard Registered Posts: 368 Dedicated contributor 🦉
    If 5/3 x (Proceeds - 6000) leads to a higher gain, use the original gain. Only use this formula, if it will reduce the gain.
  • sarah_d
    sarah_d Registered Posts: 10 New contributor 🐸
    thank you, i thought it might be one of those 'the lower of' things, but no where in my study notes does it say that!!!
  • 111beckstar111
    111beckstar111 Registered Posts: 158 Dedicated contributor 🦉
    Answer is £49,700 which is the lower of the 2
  • Kyle
    Kyle Registered Posts: 45 Regular contributor ⭐
    Richard wrote: »
    If 5/3 x (Proceeds - 6000) leads to a higher gain, use the original gain. Only use this formula, if it will reduce the gain.

    And you should only need this formula if the original cost is less than 6000.

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