Rose Company Limited acquired equipment on 3 June 2018. The equipment was acquired for ₦456,780. Rose Company Limited prepares its financial statements to 31 May every year. Rose Company still uses the equipment at the end of 31 May 2019, and on that date, the market value of the equipment is ₦562,840. The company sells the equipment on 30 June 2019 for ₦521,210.
Required:
i. Estimate the cost of selling the equipment by applying the historical cost measurement basis.
ii. Calculate the profit on the sale of equipment.
See the suggested answers to practice activity 9.2 here.
Suggested answers to practice activity 9.2
i. The cost of the equipment using historical cost measurement basis is ₦456,780.
ii.The profit on the sale of equipment is calculated as follows:
The gain on sale of equipment is wholly recognised in the statement of profit or loss and other comprehensive income for the year ended 31 May 2020.
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