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JAMB Principles of Accounts 2006 Question 3

Question 3

Depreciation

On January 1 2005, a machine was bought for ₦56 000 to last for 5 years with a residual value of ₦1 000.
The rate of the yearly depreciation expense would be

  1. A.50%
  2. B.40%
  3. C.30%
  4. D.20%
Show the answer and explanation

Answer: D (20%)

Explanation

The machine is written off evenly over 5 years, so the rate is 1/5 = 20% a year (11 000 ÷ 55 000).