- 1 Marks
Question
A company bought equipment worth ₦200,000 and the equipment is to be depreciated at 5%, using the reducing balance method. What would be the value of the asset after 3 years?
A. ₦170,000
B. ₦171,475
C. ₦180,505
D. ₦190,000
E. ₦200,000
Answer
Answer:
B. ₦171,475
Explanation:
In the reducing balance method, depreciation is calculated as a percentage of the asset’s book value at the beginning of each period.
Year 1: ₦200,000 – (5% of ₦200,000) = ₦190,000
Year 2: ₦190,000 – (5% of ₦190,000) = ₦180,500
Year 3: ₦180,500 – (5% of ₦180,500) = ₦171,475
- Tags: Asset Valuation, Depreciation, Reducing Balance
- Level: Level 1
- Topic: Depreciation Methods and Accounting for Disposals
- Series: MAY 2022
- Uploader: Kwame Aikins