On Ist January, 1993, lobo Company purchased equipment for N18,000. it uses straight-line depreciation with an estimates eight-year useful life and a N2,000 salvage value. On 31st December, 1996, it sells the equipment for N8000. In recording this sales, it should reflect?
-
A.
N10,000 loss -
B.
N2,000 loss -
C.
N6,000 gain -
D.
N8,000 gain
Correct Answer: Option B
Explanation
equipment price = 18000
salvage value after 8 years useful life = 2000
If in 1996 ( 3 years later) it is sold for 8000, hence we have
18000 – 8000 = 10000
This means that, the quiptment was suppose to have been sold for 10,000 instead it was sold for 8,000. this shows a N2000 loss