what is the economic life of an asset?ans.the service life that minimizes the marginal cost of an assetthe service life that maximizes revenue generated by an assetthe service life that accounts for the cost of an asset replacementthe service life that minimizes the average cost of an asset over time Previous Marked for Review Next

The economic life of an asset is the period during which it is financially beneficial to keep the asset in use. This period is not necessarily the same as the asset's actual physical lifespan. Instead, it's the period during which the asset can be profitably exploited.

Here are the steps to understand it:

1. The economic life of an asset begins when the asset is acquired and put into use.

2. Over time, the asset is used and begins to depreciate, or lose value. This is due to factors such as wear and tear, obsolescence, or changes in market demand.

3. At the same time, the asset may generate revenue or provide some other form of economic benefit. For example, a machine in a factory may produce goods that are sold for profit.

4. The economic life of the asset is the period during which the benefits (revenue or other economic benefits) exceed the costs (depreciation, maintenance, etc.).

5. When the costs begin to exceed the benefits, the economic life of the asset is considered to be over. At this point, it may be more cost-effective to replace the asset rather than continue to use it.

6. Therefore, the economic life of an asset is the service life that minimizes the average cost of an asset over time. It takes into account the cost of asset replacement and aims to maximize the revenue generated by the asset.