Use the following information to answer the question below A firm bought a lathe machine for Le 45,600 on 1s January 2015. The life span was estimated to be...

Assessment: WAEC SSCE - Financial Accounting - 2019 (Objective) Subject: Financial Accounting

Question 1 Report

Use the following information to answer the question below

A firm bought a lathe machine for Le 45,600 on 1s January 2015. The life span was estimated to be 20 years while scrap at the end of the period was valued at Le 1,600. It was to be depreciated by the fixed installment method.

 The depreciation per annum is 

Answer Details
The fixed installment method of depreciation assumes that the asset loses an equal amount of value each year over its useful life. To determine the depreciation per annum using this method, we subtract the salvage value (scrap value) from the original cost of the asset and then divide the result by the useful life in years. In this case, the original cost of the lathe machine is Le 45,600, and the salvage value is Le 1,600. The useful life of the machine is 20 years. Therefore, the annual depreciation is: Depreciation = (Original cost - Salvage value) / Useful life Depreciation = (45,600 - 1,600) / 20 Depreciation = 44,000 / 20 Depreciation = 2,200 Therefore, the depreciation per annum for the lathe machine is Le 2,200.
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