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 a...

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 net book value of the machine in the balance sheet as at 31st December 2020 was

Answer Details

The net book value of an asset is the cost of the asset less its accumulated depreciation. From the information given, we know that the machine was bought for D 1,200,000 and depreciation is charged at 10% per annum using the diminishing balance method. Therefore, the accumulated depreciation as at 31st December 2020 is D 1,200,000 x 10% x 3 = D 360,000. The net book value of the machine as at 31st December 2020 will be the cost of the machine less the accumulated depreciation, which is D 1,200,000 - D 360,000 = D 840,000. Therefore, the net book value of the machine in the balance sheet as at 31st December 2020 is D 840,000. Option A - D 874,800 is not correct because it is higher than the net book value as at 31st December 2020. Option B - D 972,000 is not correct because it is higher than the cost of the machine. Option C - D 1,080,000 is not correct because it is higher than the cost of the machine. Option D - D 787,320 is not correct because it is lower than the net book value as at 31st December 2020. Therefore, the correct answer is option A - D 874,800.