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JAMB Principles of Accounts 1995 Question 17

Question 17

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
The book value of the asset as at 31/12/86 was

  1. A.₦3 731 250.00
  2. B.₦2 487 500.00
  3. C.₦1 268 750.00
  4. D.₦1 020 000.00.
Show the answer and explanation

Answer: D (₦1 020 000.00.)

Explanation

From 1/1/71 to 31/12/86 is 16 years: 16 × 248 750 = ₦3 980 000. Book value = 5 000 000 − 3 980 000 = ₦1 020 000.