Question

Ellen's Antiques reported the following in its December 31, 2021, balance sheet: Equipment $ 4,000,000 Accumulated depreciation—equipment $ 3,150,000 In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost.
Required: Compute the average age of Ellen's equipment at 12/31/2020.

Answer 1

Answer:7 years

Explanation:

Depreciation per annum

Cost- salvage value/ no of years

$4,000,000-400,000/8

= $450,000

Accumulated depreciation= depreciation per annum * no of year

Therefore no of years

= Cross multiply

Accumulated depreciation/ depreciation per annum

=$ 3,150,000/$450,000

= 7 years.