A machine was purchased for ₦480,000 with an estimated residual value of ₦30,000 and a useful life of 5 years. What is the annual depreciation charge using the straight-line method?
A₦96,000
B₦90,000CORRECT
C₦84,000
D₦78,000
GCEFinancial AccountingDepreciation2023
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Why the answer is B, and why the others tempt you.
Under the straight-line method, annual depreciation = (Cost − Residual value) ÷ Useful life = (₦480,000 − ₦30,000) ÷ 5 = ₦450,000 ÷ 5 = ₦90,000. Option A ignores the residual value, dividing the full cost by 5. Options C and D are arithmetically incorrect distractors.
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