WAEC Accounting 2014 Paper

Concept:Straight-line depreciation charges the same fixed annual depreciation amount over the entire useful life of an asset.Explanation:The formula for straight-line depreciation is:$$\text{Annual depreciation} = \frac{\text{Cost} - \text{Residual value}}{\text{Estimated useful life}}$$From the question, identify the given figures:Cost of motor vehicle = ₦85,000Residual value = ₦5,000Estimated useful life = 10 yearsFirst compute the depreciable amount by subtracting the residual value from the cost:$$85{,}000 - 5{,}000 = 80{,}000$$Thus, the depreciable amount is ₦80,000.Now divide this amount by the estimated useful life:$$\frac{80{,}000}{10} = 8{,}000$$This means the motor vehicle will lose ₦8,000 of its value every year.So the annual depreciation charge is ₦8,000.Answer:₦8,000 (Option C)