WAEC Accounting 2022 Paper

Concept:Depreciation under the diminishing balance method is charged on the book value at the beginning of each year. To find profit or loss on sale, compare the sale proceeds with the net book value on the date of sale.Explanation:The machine was held from 1 January 2018 to 31 December 2021, which is 4 full years.Depreciation rate $= 10\% = 0.10$.Year 1: $10\% \times 1,200,000 = 120,000$Book value $= 1,200,000 - 120,000 = 1,080,000$Year 2: $10\% \times 1,080,000 = 108,000$Book value $= 1,080,000 - 108,000 = 972,000$Year 3: $10\% \times 972,000 = 97,200$Book value $= 972,000 - 97,200 = 874,800$Year 4: $10\% \times 874,800 = 87,480$Net book value at sale $= 874,800 - 87,480 = 787,320$Alternatively:Net book value $= 1,200,000 \times (0.9)^4 = 787,320$Sale proceeds $= 880,000$Profit on sale $= 880,000 - 787,320 = 92,680$Answer:D 92,680 profit.