Aplant 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.
a. 7
b. 5
c. 4
d. 15
how is it calculated?

The remaining useful life of the plant asset is 4 years.

Explanation:

How to compute an assets useful life:

Determining the plant's depreciation base.

The plant's depreciation base = Acquisition cost - Salvage value

The plant's depreciation base = 80,000 - 20,000.

The plant's depreciation base/ depreciable amount = 60,000.

Determining the plant's annual depreciation expense.

The plant's annual depreciation expense = The plant's depreciation base/       Useful life.

The plant's annual depreciation expense = 10,000.

The plant's depreciation base = 60,000.

Useful life can be expressed as an unknown X.

Therefore 10,000 = 60,000/X

10,000X = 60,000

X = 60,000/10,000

X = 6 years of useful life.

Determining the when accumulated depreciation should be $ 20,000.

Since we have the number of useful years and the annual depreciation expense,we can now work out the accumulated depreciation for each useful year.

Accumulated depreciation for each year will be computed as:

Annual depreciation × number of useful life.

Year 1 = 10,000 × 1 = 10,000.

Year 2 = 10,000 × 2= 20,000

Year 3 = 10,000 × 3 =30,000.

Year 4 = 10,000 × 4=40,000.

Year 5 = 10,000 × 5= 50,000.

Year 6 = 10,000 × 6= 60,000

From the above schedule we can see that the current year is year  2.

Therefore the remaining useful years can be computed as:

Remaining useful life = Total useful life - Current useful life

Remaining useful life = 6 - 2 .

Remaining useful life = 4

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