JAMB Accounting 2015 Objective — Question 19

Question 19 of 50 from the Joint Admissions and Matriculation Board (JAMB) Accounting 2015 Objective paper, with the correct answer and a full explanation.

On 1st January 1993, Lobo Company purchased equipment for ₦18,000. It uses straight-line depreciation and a ₦2,000 salvage value, depreciated over 4 years. On 31st December 1996, it sells the equipment for ₦8,000. In recording this sale, it should reflect

A. ₦10,000 loss
B. ₦2,000 loss
C. ₦6,000 gainCorrect
D. ₦8,000 gain

Explanation

Annual depreciation = (18,000−2,000)/4 = ₦4,000. Accumulated depreciation over 4 years = ₦16,000. Net book value = 18,000−16,000 = ₦2,000. Profit on disposal = 8,000−2,000 = ₦6,000 gain.

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