A vehicle bought for KSh 640,000 is depreciated at 25% per year on the reducing balance method. What is its net book value at the end of year 2?
Answer and explanation
Correct answer: A. KSh 360,000
- Step 1: Year 1 depreciation = 25% x 640,000 = 160,000, so the net book value is 480,000. Step 2. Year 2 depreciation is worked on that reduced balance: 25% x 480,000 = 120,000. Step 3. Net book value = KSh 360,000. Answer: KSh 360,000. Why not the others: KSh 320,000: That takes 25% of the original cost off twice, which is the straight-line method. KSh 480,000: That is the net book value after only one year. KSh 160,000: That is the first year's depreciation charge, not the net book value.
Practise more Depreciation.
Free questions with an explanation for every one, and full timed KASNEB CPA Foundation Level (Kenya) mock tests.
More Depreciation questions
- A machine costing KSh 1,200,000 has an expected residual value of KSh 200,000 after 5 years. Using the straight-line method, what is the ann…
- A machine costing KSh 800,000 has an expected residual value of KSh 50,000 after 5 years. Using the straight-line method, what is the annual…
- A machine costing KSh 450,000 has an expected residual value of KSh 30,000 after 7 years. Using the straight-line method, what is the annual…
- A machine costing KSh 2,400,000 has an expected residual value of KSh 400,000 after 8 years. Using the straight-line method, what is the ann…
- A machine costing KSh 600,000 has an expected residual value of KSh 60,000 after 6 years. Using the straight-line method, what is the annual…
- A machine costing KSh 950,000 has an expected residual value of KSh 150,000 after 4 years. Using the straight-line method, what is the annua…