A plant asset was purchased on January 1 for $100,000 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 $50,000. The remaining useful life of the plant asset isGroup of answer choices5 years.10 years.8 years.3 years.
Question
A plant asset was purchased on January 1 for 20,000 at the end of its useful life. The current year's Depreciation Expense is 50,000. The remaining useful life of the plant asset isGroup of answer choices5 years.10 years.8 years.3 years.
Solution
To determine the remaining useful life of the plant asset, we need to calculate the total depreciation that has been recorded so far.
First, we subtract the current year's Depreciation Expense of 50,000.
10,000 = $40,000
Next, we subtract the remaining accumulated depreciation from the original cost of the asset to find the remaining book value.
40,000 = $60,000
Finally, we divide the remaining book value by the annual depreciation expense to find the remaining useful life.
10,000 = 6 years
Therefore, the remaining useful life of the plant asset is 6 years.
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