Question

Q 9.42: A plant asset was purchased on January 1 for $80,000 with an estimated salvage value of $20,000 at the end of its useful life. The current year's Depreciation Expense is $10,000 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

4 years

Explanation:

For calculation of remaining useful life of the plant asset first we need to find out the Straight Line Depreciation (annual), useful life and life end which is shown below:-

Straight Line Depreciation (annual) = (Cost – Salvage Value) ÷ Useful Life

$10,000 = ($80,000 - $20,000) ÷ Useful Life

$10,000 × Useful Life = $80,000 - $20,000

Useful Life = ($80,000 - $20,000) ÷ $10,000

Useful Life = 6 years

Life ended = Accumulated Depreciation ÷ Annual Depreciation

= $20,000 ÷ $10,000

= 2 years

Remaining Useful Life = Useful life - Life ended

= 6 years - 2 years

= 4 years