A vehicle that cost KSh 300,000, with accumulated depreciation of KSh 240,000, was sold for KSh 80,000. What was the result of the disposal?
Answer and explanation
Correct answer: C. profit of KSh 20,000
- Step 1: Net book value = cost - accumulated depreciation = 300,000 - 240,000 = 60,000. Step 2. Proceeds - net book value = 80,000 - 60,000 = 20,000, which is a profit. Answer: profit of KSh 20,000. Why not the others: loss of KSh 20,000: That has the right amount but the wrong direction. profit of KSh 220,000: That compares the proceeds with the original cost instead of the net book value. profit of KSh 160,000: That compares the proceeds with the accumulated depreciation.
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