Question

A plant asset was purchased on January 1 for $80,000 with an estimated salvage value of $20,000 at the end of its useful life. The current year's Depreciation Expense is $10,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $20,000. The remaining useful life of the plant asset is ________ years.
A : 7
B : 5
C : 4
D : 15
How is it calculated?

Answer 1

Answer: C - 4

Depreciation expense = ( Asset cost - Salvage value ) / useful life

$10,000 = ( $80,000 - $20,000 ) /useful life

Useful life = $60,000 / $10,000

Useful life = 6 years

Accumulated deprecation = $20,000 which is the sum of depreciation expense for two years

The remaining useful life = 6 -2 = 4 years

Explanation:

Deprecation expense is the yearly deprecation recorded on the income statement. Accumulated Depreciation is the sum of all the depreciation expenses that has being recognised on the income statement.