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GCE Financial Accounting 1989 Question 38

Question 38

Depreciation

A machine cost ₦12,000 and has a useful life of 4 years and an expected disposal value of ₦400. Using the reducing balance method what will be the depreciation charge for year 2 at 20%? (ignore residual value)

  1. A.₦3,000
  2. B.₦2,900
  3. C.₦2,400
  4. D.₦1,920
  5. E.₦1,536
Show the answer and explanation

Answer: D (₦1,920)

Explanation

Year 1: 20% × 12,000 = 2,400, leaving 9,600. Year 2: 20% × 9,600 = ₦1,920.