The following is an extract taken from the statement of financial position of Gerken Ltd as at 31 December 2006:

On 31 December 2007, new equipment, costing £40,000, was purchased. The purchase price is settled partly through the trade-in of old equipment. The old equipment was traded in at a value of £7,500. The old equipment had cost £70,000 in 2002, but had been depreciated by £59,000 as at 31 December 2007. Depreciation is normally provided for equipment at 25% on cost – no depreciation is to be provided for the new equipment.

(a) Calculate the profit or loss on disposal of the old equipment.

(b) Produce a statement of financial position extract showing equipment after all the above transactions have been completed on 31 December 2007.

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Gerken Ltd Statement of financial position extract as at 31 Dec 2006 Non-current assets Equipment Less: Depreciation 200,000 125,000 75,000