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JAMB Principles of Accounts 1995 Question 16

Question 16

Depreciation

Machinery:
Historical cost ₦5 000 000.00
Estimated useful life 20 years
Residual value ₦25 000.00
Date of acquisition 1/1/71
Depreciation method Straight line
Accumulated depreciation on the asset as at 31/12/81 was

  1. A.₦2 487 500.00
  2. B.₦2 736 250.00
  3. C.₦4 511 192.00
  4. D.₦4 975 000.00.
Show the answer and explanation

Answer: B (₦2 736 250.00)

Explanation

Yearly depreciation = (5 000 000 − 25 000) ÷ 20 = ₦248 750. From 1/1/71 to 31/12/81 is 11 years: 11 × 248 750 = ₦2 736 250.