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WAEC SSCE - Financial Accounting - 2006 (Objective)

Question 1 Report

Using the reducing balance method, the depreciation charged for year 2002 was
Use the following information to answer the given question
\(\begin{array}{c|c} \text{Motor vehicles(at cost) 1/1/2002} & ₦1,000,000\\ \text{Addition to motor vehicles 1/7/2003} & ₦600,000 \\ \text{Depreciation rate 10%} & \end{array}\)
Using the straight reducing balance method, the depreciation charged for year 2002 was
Answer Details
The straight reducing balance method is a depreciation method in which the depreciation expense charged each year is calculated as a fixed percentage of the remaining net book value of the asset. In this case, the depreciation rate is 10%. To calculate the depreciation expense for the year 2002 using the straight reducing balance method, we need to determine the net book value of the asset as at the beginning of the year. This is given by: Net book value as at 1/1/2002 = Cost of motor vehicle - Accumulated depreciation Net book value as at 1/1/2002 = ₦1,000,000 - 0 = ₦1,000,000 The depreciation expense for the year 2002 is then calculated as 10% of the net book value as at the beginning of the year: Depreciation expense for 2002 = 10% x ₦1,000,000 = ₦100,000 Therefore, the correct answer is ₦100,000.
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