Question on: JAMB Accounting - 2022
Use the information below to answer question
An asset was purchase for N343m in 2003.
The estimated life of the asset was 3 years with a residual value of N28m.
What was the asset value at the beginning of the third year?
N63m
N133m
N36m
N28m
The asset value at the beginning of the third year can be calculated using the straight-line depreciation method. The formula for straight-line depreciation is:
\[ \text{Depreciation per year} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Estimated Life}} \]
In this case:
\[ \text{Depreciation per year} = \frac{N343m - N28m}{3 \text{ years}} \]
\[ \text{Depreciation per year} = \frac{N315m}{3 \text{ years}} = N105m \]
Now, to find the asset value at the beginning of the third year:
\[ \text{Asset value at the beginning of third year} = \text{Cost of Asset} - (\text{Depreciation per year} \times \text{Number of Years}) \]
\[ \text{Asset value at the beginning of third year} = N343m - (N105m \times 2) \]
\[ \text{Asset value at the beginning of third year} = N343m - N210m = N133m \]
Therefore, the correct answer is N133m.
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