- 1 Marks
Question
On 1 January 2013, a motor vehicle with an expected useful life span of 5 years and a residual value of N100,000 was acquired for N1,600,000. Using the sum-of-the-years-digits method, what is the second-year depreciation provision of the motor vehicle?
A. N400,000
B. N426,000
C. N530,000
D. N540,000
E. N600,000
Answer
Answer: A
Explanation:
The sum-of-the-years-digits method applies fractions of the remaining useful life to calculate depreciation. For a 5-year asset, the sum of the digits is 15 (5+4+3+2+1). The second year uses the fraction 4/15 of the depreciable amount (N1,600,000 – N100,000), which gives N400,000 as the depreciation for the second year.
- Tags: Depreciation, Motor Vehicle, Sum-of-the-Years-Digits
- Level: Level 1
- Topic: Depreciation Methods and Accounting for Disposals
- Series: MAY 2015
- Uploader: Joseph