Question Tag: Asset Re-Acquisition

Fashion Stitches Limited, Lagos, is a private limited liability company specializing in sewing and sales of clothes and allied materials for medium and upper-class clients in highbrow areas of the country.

The company has a core sewing staff, while other employees frequently travel to major cities such as Abuja, Kaduna, Ibadan, and Port Harcourt to receive orders from clients.

While reviewing their activities for the first quarter ended March 31, 2022, the Operating Officer noted that the recent increase in travel and staff costs, which had risen by over 150% compared to the corresponding period in 2021, negatively impacted the company’s financial performance.

Management decided to relocate the business to the Federal Capital Territory (FCT), Abuja, where over 75% of their clients reside. The move is planned for November 15, 2022, involving the disposal and re-acquisition of some assets required for the business.

The following transactions took place between April and October 2022:

1. Property Disposal and Acquisition:
   • The property (land and building) in Lagos, acquired in 2008 for N18,220,000, was sold for N65,100,000.
   • Incidental costs of disposal included:
     • Estate valuer’s fee: N1,627,500
     • Renovation expenses: N1,800,000
     • Advertisement cost: N250,000
   • A new property was purchased in the FCT for N80,000,000.
2. Disposal and Re-Acquisition of Sewing Machines and Equipment:
   • Sewing machines and tailoring equipment, bought between 2015 and 2019 for N3,300,000, were disposed of for N2,800,000.
   • New machines and equipment were acquired for N7,130,000.
3. Disposal and Re-Acquisition of Generating Set:
   • A 10 KVA generating set, which cost N1,500,000 in 2017, was disposed of for N1,900,000.
   • Another generating set was acquired for N2,450,000.