Question

A plant asset was purchased on January 1 for $55,000 with an estimated salvage value of $5,000 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 $25,000. The remaining useful life of the plant asset is:_________
A. 10 years.
B. 11 years.
C. 6 years.
D. 5 years.

Answer 1

Answer:

remaining useful life = 5 years

so correct option is D. 5 years

Explanation:

given data

purchased cost = $55,000

salvage value = $5,000

current year's depreciation expense = $5,000

Depreciation at the end of the year = $25,000

to find out

remaining useful life of the plant asset is

solution

first we get here useful life by depreciation expense with straight line method that is express as

Depreciation expense = (Cost - Salvage value) ÷ Useful life   ..............1

put here value we get

$55000 - $5000 ÷ Useful life = $5000

useful life = 10 years

and depreciation years remaining will be here as every year the asset will accumulate $5,000 depreciation and accumulated depreciation balance is $25,000

depreciation years remaining = $\frac{25000}{5000}$

depreciation years remaining = 5 years

so remaining useful life will be

remaining useful life = useful life  - depreciation years remaining

remaining useful life = 10 years - 5 years

remaining useful life = 5 years

so correct option is D. 5 years