Answer:
5 years
Explanation:
Given that,
Book value of equipment at December 31, 2010 = $45,000
Book value of equipment at December 31, 2009 = $60,000
Original cost of the equipment = $75,000
No salvage value
Book of value of a particular asset includes the adjustment of depreciation expense. So, it is calculated as follows:
Book value of equipment at December 31, 2009 = Cost of equipment - Depreciation expense for 2009
$60,000 = $75,000 - Depreciation expense for 2009
Depreciation expense for 2009 = $75,000 - $60,000
= $15,000
Depreciation for 2010 = $15,000
Here, we are following straight line depreciation method,
Depreciation expense = (Cost of equipment - Salvage value) ÷ Estimated useful life
$15,000 = ($75,000 - 0) ÷ Estimated useful life
Estimated useful life = $75,000 ÷ $15,000
= 5 years
