A farmer bought a tractor for ₦4,800,000. The tractor has a useful life of 8 years and a salvage value of ₦800,000. Using the straight-line method, what is the annual depreciation of the tractor?
A₦600,000
B₦500,000CORRECT
C₦400,000
D₦550,000
GCEAgricultural ScienceFarm Management and Records2024
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Why the answer is B, and why the others tempt you.
Using the straight-line formula: Annual depreciation = (Cost − Salvage value) ÷ Useful life = (₦4,800,000 − ₦800,000) ÷ 8 = ₦4,000,000 ÷ 8 = ₦500,000. Option A (₦600,000) results from dividing the full purchase price by 8; option C (₦400,000) uses 10 years as the denominator.
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