Use the following information to answer this question. Cost of assets (01/01/18) ₦ 600,000. Annual depreciation charge is 15% on reducing balance basis. The...

Use the following information to answer this question.
Cost of assets (01/01/18) ₦ 600,000. Annual depreciation charge is 15% on reducing balance basis.

The net book value of the asset at 31/12/19 is

Answer Details

Depreciation is a method of accounting that allocates the cost of an asset over its useful life, reflecting its gradual decrease in value. The reducing balance method calculates the depreciation charge based on the declining net book value of an asset. For the given scenario, the net book value at the end of the first year (31/12/18) can be calculated as follows: Cost of asset: ₦600,000 Depreciation charge for the first year: ₦600,000 * 15% = ₦90,000 Net book value at 31/12/18: ₦600,000 - ₦90,000 = ₦510,000 Next, we can calculate the net book value at the end of the second year (31/12/19) as follows: Cost of asset: ₦510,000 Depreciation charge for the second year: ₦510,000 * 15% = ₦76,500 Net book value at 31/12/19: ₦510,000 - ₦76,500 = ₦433,500 So, the net book value of the asset at 31/12/19 is ₦433,500.