A company purchased a motor vehicle on 1 January 2021 for ₦12,000,000. It is the company's policy to depreciate motor vehicles at 25% per annum on the reducing balance basis, with a full year's charge in the year of acquisition and none in the year of disposal. The vehicle was sold on 30 June 2023 for ₦5,062,500. What is the profit or loss on disposal?

Full year depreciation is charged in 2021 and 2022; none in 2023 (year of disposal). NBV at end of 2021: ₦12,000,000 × (1 − 0.25) = ₦9,000,000. NBV at end of 2022: ₦9,000,000 × (1 − 0.25) = ₦6,750,000. No depreciation in 2023, so carrying amount at disposal = ₦6,750,000. Sale proceeds = ₦5,062,500. Loss on disposal = ₦6,750,000 − ₦5,062,500 = ₦1,687,500. Options B and D incorrectly suggest a profit, while option C understates the loss.