Question

A plant asset was purchased on January 1 for $40,000 with an estimated salvage value of $8,000 at the end of its useful life. The current year's Depreciation Expense is $4,000 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

a. 10 years.
b. 8 years.
c. 5 years.
d. 3 years.

Answer 1

b. 8 years.

Step-by-step explanation:

We solve this with the formula for straight line depreciation:

`(cost - salvage )/(useful \:\: life)`

We plug our values and solve

`(40,000 - 8,000 )/(useful \:\: life) = 4,000`

`(32,000)/(4,000) = useful \:\: life`

useful life: 8 years