Use the following information to answeer questions below
Kako Ltd bought a machine for D 1,200,000 on 1st January 2018. Depreciation was provided annually at a rate of 10% using the diminishing balance method. The machine was sold for D 880,000 on 31st December 2021.
The profit or loss on disposal of the machine was
- D 280,000 profit
-
D 87,480 loss
- D 320,000 loss
- D 92,680 profit
The correct answer is: B
Explanation
From 2018 to 2021( accounting year) is three (3) years
| D | |
| Cost | 1200000 |
| Year 1 ( 10% x 1200000) | 120000 |
| 1080000 | |
| Year 2 ( 10% x 1080000) | 108000 |
| 972000 | |
| Year 3 ( 10% x 972000) | 97200 |
| Depreciation | 874800 |