Question

7. Jabaye, a sole trader, purchased a vehicle on 1st January 2020 for #5,000,000. He decided to depreciate the vehicle at the rate of 10% per annum. You are required to write up the Vehicle Account for the first three years using: (a) Straight line method; (b) Reducing balance method.

Accepted Answer

(a) Straight line method: Depreciation per year = 10% x #5,000,000 = #500,000. Vehicle Account: 2022 -- Bank #5,000,000; Depreciation #500,000, Bal c/d #4,500,000. 2023 -- Bal b/d #4,500,000; Depreciation #500,000, Bal c/d #4,000,000. 2024 -- Bal b/d #4,000,000; Depreciation #500,000, Bal c/d #3,500,000. 2025 -- Bal b/d #3,500,000.

(b) Reducing balance method: 2022 -- Bank #5,000,000; Depreciation #500,000 (10% x 5,000,000), Bal c/d #4,500,000. 2023 -- Bal b/d #4,500,000; Depreciation #450,000 (10% x 4,500,000), Bal c/d #4,050,000. 2024 -- Bal b/d #4,050,000; Depreciation #405,000 (10% x 4,050,000), Bal c/d #3,645,000. 2025 -- Bal b/d #3,645,000.

WAEC Book Keeping 2024 Theory — Question 7

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