Question on: JAMB Accounting - 2024
The following extracts are made from the books of Agama Enterprises:
Motor van (cost): 120000
Life span: 4 years
Rate of depreciation: 40%
Method: Diminishing Balance
The scrap value of the asset at the end of year four is:
A
#15,552
B
#10,368
C
#10,375
D
#17,280
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Correct Option: B
Using the diminishing balance method:
Year 1:
Depreciation = 120000 × 40% = 48000
Book value = 120000 − 48000 = 72000
Year 2:
Depreciation = 72000 × 40% = 28800
Book value = 72000 − 28800 = 43200
Year 3:
Depreciation = 43200 × 40% = 17280
Book value = 43200 − 17280 = 25920
Year 4:
Depreciation = 25920 × 40% = 10368
Book value = 25920 − 10368 = 15552
The scrap value after four years is #15,552.
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