Question

A plant asset was purchased on January 1st for $50,000 with an estimated salvage value of $10,000 at the end of its useful life. The current year's Depreciation Expense is $5,000 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.

Answer 1

The remaining useful life of the plant asset is 4 years.

Step-by-step explanation:

Under the straight line method of depreciation, the depreciation expense charged every year on the asset remains constant. The formula for depreciation expense per year under straight line method is,

Depreciation expense = (Cost - salvage value) / estimated useful life

Using the available figures, we calculate the estimated useful life of the plant asset o be,

5000 = (50000 - 10000) / estimated useful life

Estimated useful life = 40000 / 5000

Estimated useful life is = 8 years

The accumulated depreciation tells the total depreciation that has been charged on the asset.

The numbers of years for which depreciation has already been charged are = 20000 / 5000 = 4 years

The remaining useful life of the plant asset = 8 - 4 = 4 years