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WAEC Financial Accounting 2003 Question 38

Question 38

Depreciation

A fixed asset was bought for N60,000 on 1st January, 1997. Depreciation was provided at 10% on cost. It was sold for N16,000 on 30th June, 2001.
The profit or loss on sale was

  1. A.N17,000 profit
  2. B.N17,000 loss
  3. C.N16,000 profit
  4. D.N16,000 loss
Show the answer and explanation

Answer: B (N17,000 loss)

Explanation

4½ years × 6,000 = 27,000; NBV 33,000; 16,000 − 33,000 = N17,000 loss.