WAEC Financial Accounting 1994 Question 47

Question 47

Depreciation

A machine bought for ₦7,000 was estimated to have a useful life of 4 years and a scrap value of ₦500. Using the reducing balance method, what is the amount of depreciation for the second year?

A.₦1,313
B.₦1,406
C.₦1,625
D.₦1,750
E.₦1,875.

Show the answer and explanation

Answer: A (₦1,313)

Explanation

Taking a rate of 25% (one quarter for a 4-year life): year 1 = 1,750, leaving 5,250; year 2 = 25% × 5,250 = ₦1,313.