- 1 Marks
Question
A vehicle was purchased on 1 January 2011 at a cost of N2,000,000 and was depreciated at 25% on cost. It was sold on 31 December 2013 for N1,400,000. Full-year depreciation was charged in the years of purchase and disposal.
Determine the profit or loss on the disposal.
A. N500,000 profit
B. N500,000 loss
C. N900,000 profit
D. N900,000 loss
E. N1,150,000 profit
Answer
Answer: C
Explanation:
The total depreciation for the three years (2011–2013) is N1,500,000 (N500,000 per year). The carrying value of the vehicle at the time of sale was N500,000. Since the vehicle was sold for N1,400,000, the profit on disposal is N900,000.
- Tags: Depreciation, Disposal of assets, Profit or Loss
- Level: Level 1
- Topic: Depreciation Methods and Accounting for Disposals
- Series: MAY 2015
- Uploader: Kwame Aikins