A machine bought for N7,000 was estimated to have a useful life of 4 years and a scrap value of N500, Using the reducing balance method, what is the amount ...

Answer Details

The reducing balance method of depreciation is a method where the depreciation charge is calculated as a fixed percentage of the net book value of the asset at the beginning of each period. In this case, the machine was bought for N7,000 and has an estimated useful life of 4 years and a scrap value of N500. The total depreciation to be charged over the life of the asset is N7,000 - N500 = N6,500. The depreciation rate per year can be calculated as 100% / 4 years = 25% per year. For the second year, the net book value of the asset at the beginning of the year is: N7,000 - (25% x N7,000) = N5,250 Therefore, the depreciation charge for the second year is: (N5,250 - N500) x 25% = N1,313 So the amount of depreciation for the second year is N1,313. Therefore, the answer is option A, N1,313.