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WAEC Financial Accounting 1998 Question 39

Question 39

Depreciation

The Accounting year of Fehintola Ltd. ends on 31st December every year.
Plant and Machinery purchased on 1st January, Year 1: N600,000
Depreciation rate per annum: 10%
Scrap value: N60,000
Using the straight line method, what is the cumulative depreciation at the end of Yr. 3?

  1. A.N216,000
  2. B.N206,340
  3. C.N180,000
  4. D.N162,600
  5. E.N162,000.
Show the answer and explanation

Answer: E (N162,000.)

Explanation

Yearly charge = 10% × (600,000 − 60,000 scrap) = 54,000; after 3 years 3 × 54,000 = N162,000.