A motor vehicle bought for N16,000 was estimated to have a useful life span of 4 years and a scrap of N2,000. What is the net book value of the motor vehicl...

A motor vehicle bought for N16,000 was estimated to have a useful life span of 4 years and a scrap of N2,000. What is the net book value of the motor vehicle at the end of the third year, using the straight line method?

Answer Details

The straight-line method is a method of calculating depreciation where the same amount of depreciation is charged each year. To calculate the depreciation for each year, we need to subtract the scrap value from the cost of the asset, then divide the result by the useful life of the asset. In this case, the cost of the motor vehicle is N16,000, and the scrap value is N2,000, so the depreciable cost is N16,000 - N2,000 = N14,000. The useful life of the motor vehicle is 4 years, so the annual depreciation charge is N14,000 / 4 = N3,500. At the end of the third year, the accumulated depreciation will be N3,500 × 3 = N10,500. Therefore, the net book value of the motor vehicle at the end of the third year will be the cost of the asset minus the accumulated depreciation, which is N16,000 - N10,500 = N5,500. So the correct answer is N5,500.