Question on: SS1 Accounting - Provision For Depreciation On Fixed Assets: Meaning And Calculation of Depreciation
Let's say a company purchases a delivery van for ₦2,000,000 with a useful life of 8 years. The salvage value of the van is estimated to be ₦200,000. What is the depreciation expense per year using the straight-line method?
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To calculate the answer, we use the straight-line method formula:
Depreciation expense per year = (Cost of the asset - Salvage value) / Useful life
Substituting the given values:
Depreciation expense per year = (₦2,000,000 - ₦200,000) / 8 years
Depreciation expense per year = ₦225,000
Therefore, the depreciation expense per year is ₦225,000
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