An asset was bought on 1st January, 1995 for N60,000. Depreciation was provided for annually at 20% on cost. It was sold for N21,000 on 30th October 1998. D...

The asset was bought on 1st January 1995 for N60,000 and depreciated annually at 20% on cost. The accumulated depreciation as at 30th October 1998 is calculated as follows: Depreciation for 1995 = 20/100 x 60,000 = N12,000 Depreciation for 1996 = 20/100 x 60,000 = N12,000 Depreciation for 1997 = 20/100 x 60,000 = N12,000 Depreciation for 1998 (up to 30th October) = 20/100 x 60,000 x 10/12 = N10,000 Total accumulated depreciation as at 30th October, 1998 = N46,000 The book value of the asset on 30th October, 1998 is calculated as follows: Cost price of the asset = N60,000 Accumulated depreciation = N46,000 Book value = Cost price - Accumulated depreciation Book value = N60,000 - N46,000 = N14,000 Since the asset was sold for N21,000, the profit on sale is calculated as follows: Profit on sale = Selling price - Book value Profit on sale = N21,000 - N14,000 = N7,000 Therefore, the profit on sale is N7,000. Answer option: (D) N9,000 is not correct.