Question

A plant asset was purchased on January 1 for $55000 with an estimated salvage value of $5000 at the end of its useful life. The current year's depreciation expense is $5000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25000. The remaining useful life of the plant asset isa. 6 years.b.11 years.c. 5 years.d. 10 years

Answer 1

The correct option is C.

Step-by-step explanation:

Under straight-line method, depreciation expense is (Cost - Residual value) / No of years = ($55,000 - $5,000) / X years = $5,000 yearly depreciation expense.

Depreciation expense = $50,000/X years = $5,000

$5,000X = $50,000

X = Estimated useful life =$50,000/$5,000 = 10 years

Since accumulated depreciation account at the end of the year is $25,000,

$25,000 / $5,000 = 5 years (total years of depreciation)

Therefore, the remaining useful life is 10 - 5 = 5 years.