Jeng Limited disposed a fixed asset in 1999 for N2,000. The asset was purchased in 1996 at a cost of N10,000 and has been depreciated at the rate of 20% per annum using the straight line method. What was the book value when the asset was sold?
The correct answer is C. N4,000
The asset was purchased in 1996 at a cost of N10,000. Using the straight-line method of depreciation at a rate of 20% per annum, the annual depreciation would be N2,000 (20% of N10,000).
By 1999, the asset would have been depreciated for 3 years (from 1996 to 1999), so the accumulated depreciation would be N6,000 (N2,000 per year for 3 years).
The book value of the asset at the time of disposal in 1999 would be the original cost minus the accumulated depreciation, which is N4,000 (N10,000 - N6,000).
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