Use the information to answer question . A piece of equipment costing ₦120,000 was purchased on 1/1/1996. Depreciation was provided at 20% per annum on a st...

Use the information to answer question .

A piece of equipment costing ₦120,000 was purchased on 1/1/1996. Depreciation was provided at 20% per annum on a straight-line basis. it was sold on 30/6/1999 for ₦31,500.The net book value of the piece of equipment at the time of sale was?

Answer Details

To calculate the net book value of the equipment at the time of sale, we need to determine the total depreciation charged on the equipment from 1/1/1996 to 30/6/1999. The equipment was purchased on 1/1/1996, and it was sold on 30/6/1999, which means it was used for a period of 3 years and 6 months. Using the straight-line depreciation method, we can calculate the annual depreciation as 20% of the initial cost: Annual Depreciation = 20% x ₦120,000 = ₦24,000 The total depreciation over the 3 years and 6 months is therefore: Total Depreciation = 3.5 years x ₦24,000 per year = ₦84,000 To calculate the net book value, we need to subtract the total depreciation from the initial cost of the equipment: Net Book Value = ₦120,000 - ₦84,000 = ₦36,000 Therefore, the net book value of the piece of equipment at the time of sale was ₦36,000.