- 1 Marks
Question
What is the gain or loss on disposal of the old car if the company received a part-exchange allowance of ₦20,000 against an old car, which originally cost ₦70,000 and had accumulated depreciation of ₦45,000?
A. ₦5,000
B. ₦(5,000)
C. ₦7,000
D. ₦(7,000)
E. ₦10,000
Answer
Answer: B
Explanation: The correct answer is B (₦(5,000)). To calculate the loss on disposal, subtract the carrying amount (Cost – Accumulated Depreciation) from the part-exchange allowance received.
Carrying Amount = ₦70,000 – ₦45,000 = ₦25,000
Loss = Part-Exchange Allowance – Carrying Amount = ₦20,000 – ₦25,000 = ₦(5,000).
This indicates a loss of ₦5,000 on the disposal.
- Tags: Asset Disposal, Gain or Loss Calculation, Non-current Assets
- Level: Level 1
- Topic: Depreciation Methods and Accounting for Disposals
- Series: MAY 2024
- Uploader: Dotse