Question

Question 11 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 in the Accumulated Depreciation account at the end of the year is $20,000. The remaining useful life of the plant asset is O 10 years. 8 years. 3 years. O 5 years.

Answer 1

3rd option is right answer 3 years is remaining use life

As per straight line depreciation method every year depreciation is equal.

So on the basis of current year depreciation $ 4000 find out total useful life of plant.

Annual Depreciation = Cost of plant - salvage value / Useful life

So,. $ 4,000 = $ 40,000 - $ 8000 / useful life

Useful life = $ 32,000 / $ 4000

Now. Useful life = 8 years

So total estimated useful life plant is 8 years.

Now on the basis of total accumulated depreciation find how many year completed.

Total accumulated depreciation with current year is $ 20,000.

Now on the basis of total accumulated depreciation decided by annual depreciation find out numbers of years completed.

Years completed = Total accumulated depreciation / Annual depreciation

= $20,000 / $ 4000

= 5 years completed

Remaining useful life of plant

= Total useful life - Total years completed

= 8 years - 5 years

= 3 years

So remaining life plant is 3 years