Question

A plant asset was purchased on January 1 for $44000 with an estimated salvage value of $10000 at the end of its useful life. The current year's depreciation expense is $3400 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $27200. The remaining useful life of the plant asset is:______

Answer 1

The remaining useful life of the plant asset is 2 years.

Step-by-step explanation:

The depreciable cost of the asset is 44000 - 10000 = $34000

The straight line method charges a constant depreciation expense per year over the estimated useful life of the asset.

The depreciation expense per year is $3400.

The formula for straight line depreciation is,

Depreciation expense per year = (Cost - residual value) / estimated useful life

3400 = (44000 - 10000) / estimated useful life

3400 = 34000 / estimated useful life

Estimated useful life = 34000 / 3400 = 10 years

The accumulated depreciation has been charged for the amount of $27200. This represents a depreciation for 8 years.

27200 / 3400 = 8 years

Thus, the remaining useful life of the plant asset is 10 - 8 = 2 years