A fixed asset was bought for N60,000 on 1st January, 1997. Depreciation was provided at 10% on cost. It was bought for N16,000 on 30th June, 2001.The profit...

Answer Details

To find the profit or loss on sale of the asset, we need to first calculate the book value of the asset on the date of sale, which is the amount at which the asset is recorded on the company's balance sheet after accounting for depreciation. The asset was bought for N60,000 on 1st January, 1997, and depreciation was provided at 10% on cost. This means that each year, the asset would lose 10% of its original cost of N60,000, or N6,000. By 30th June, 2001, the asset would have been in use for 4.5 years (from January 1st, 1997 to June 30th, 2001). Therefore, the accumulated depreciation on the asset would be: Accumulated Depreciation = Depreciation per year x Number of years = N6,000 x 4.5 = N27,000 The book value of the asset on June 30th, 2001 would be the original cost of N60,000 minus the accumulated depreciation of N27,000, which is: Book Value = Cost - Accumulated Depreciation = N60,000 - N27,000 = N33,000 However, the asset was sold for N16,000, which is less than its book value of N33,000. This means that there is a loss on the sale of the asset. To calculate the loss, we subtract the selling price of N16,000 from the book value of N33,000, which is: Loss = Book Value - Selling Price = N33,000 - N16,000 = N17,000 Therefore, the answer is: ₦17,000 loss.