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 accumulated depreciation provision at the time of sale was?

Answer Details

To calculate the accumulated depreciation provision at the time of sale, we need to calculate the depreciation expense for each year first. The equipment was purchased on 1/1/1996 and sold on 30/6/1999, which means it was in use for 4.5 years (1996, 1997, 1998, 1999, and half of 1996). The annual depreciation rate is 20%, so the annual depreciation expense is: 20% x ₦120,000 = ₦24,000 The total depreciation expense over 4.5 years is: ₦24,000 x 4.5 = ₦108,000 The accumulated depreciation provision is the total depreciation expense over the years. So, the accumulated depreciation provision at the time of sale is ₦108,000. However, since the equipment was sold, we need to calculate the depreciation expense for the period of January 1, 1996, to June 30, 1999, which is 3.5 years. The annual depreciation expense is ₦24,000, so the depreciation expense for 3.5 years is: ₦24,000 x 3.5 = ₦84,000 Therefore, the accumulated depreciation provision at the time of sale was ₦84,000. So, the answer to the question is option (D) ₦84,000.