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WAEC SSCE - Financial Accounting - 2006 (Objective)

Question 1 Report

Use the following information to answer the given question
\(\begin{array}{c|c} \text{Motor vehicles(at cost) 1/1/2002} & ₦1,000,000\\ \text{Addition to motor vehicles 1/7/2003} & ₦600,000 \\ \text{Depreciation rate 10%} & \end{array}\)
Answer Details
To calculate the depreciation expense for the motor vehicles, we need to use the straight-line depreciation method. This method assumes that the asset depreciates by the same amount each year over its useful life. First, we need to determine the useful life of the motor vehicles. The question does not provide this information, so we will assume a useful life of 10 years. Next, we need to calculate the depreciation expense for each year. We can do this by dividing the cost of the asset (including any additions) by its useful life, and then multiplying that amount by the depreciation rate. Cost of asset = ₦1,000,000 + ₦600,000 = ₦1,600,000 Useful life = 10 years Depreciation rate = 10% Depreciation expense = (Cost of asset / Useful life) x Depreciation rate Depreciation expense = (₦1,600,000 / 10) x 10% Depreciation expense = ₦160,000 Therefore, the depreciation expense for the motor vehicles is ₦160,000.
Read lesson note on Nature And Significance Of Accounting (JAMB)
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