Asa Company bought a vehicle worth N20,000 and the vehicle is to be depreciated at 5%. Using the reducing balance method of depreciation, what would be the value of the asset after 3 years?

  • A N19,000.00
  • B N18,050.50
  • C N17,147.50
  • D 16,290.13
jamb 1999accounting

The correct answer is C. N17,147.50

The reducing balance method of depreciation applies the depreciation rate to the net book value (cost - accumulated depreciation) of the asset at the beginning of each period.

Let’s calculate the value of the vehicle after 3 years:

  1. After the first year: N20,000 - (N20,000 * 5/100) = N19,000.
  2. After the second year: N19,000 - (N19,000 * 5/100) = N18,050.
  3. After the third year: N18,050 - (N18,050 * 5/100) = N17,147.50.

The value of the vehicle after 3 years, using the reducing balance method of depreciation, would be N17,147.50.

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