JAMB Accounts Principles of Accounts 2014 Paper

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Question : 17

Total: 49

If machine X cost #600,000 with anticipated life span of five years and estimated scrap value of #50,000, using straight line method; depreciation charged for two years will be

#700,000
#240,000
#220,000
#202,000

Solution:

Concept:

Straight-line depreciation spreads the depreciable amount evenly over the useful life.

Explanation:

Annual depreciation =

\frac{\text{Cost} - \text{Scrap value}}{\text{Useful life}}

=

\frac{600,000 - 50,000}{5}

=

\frac{550,000}{5} = 110,000

per year.

Depreciation for two years =

110,000 \times 2 = 220,000

.

Answer:

C. #220,000

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