Question

A vehicle was purchased on January 1st for $50,000 with an estimated salvage value of $10,000. The current year's depreciation expense was $5,000 calculated on the straight-line basis and the balance in the Accumulated Depreciation account at the end of the current year was $20,000. The remaining useful life of the vehicle is ________ years.

Answer 1

Answer:

4 years

Explanation:

Given;

Purchasing cost of the vehicle = $50,000

Salvage value = $10,000

Depreciation expense = $5,000

Depreciation account at the end of the current year = $20,000

Now,

Annual Depreciation expense using the straight-line method is given as;

= $\frac{\textup{Cost - Salvage value-Depreciation account balance}}{\textup{Useful life}}$

= $\frac{\textup{50,000- 10,000-20,000}}{\textup{Useful life}}$

or

Depreciation expense = $\frac{\textup{50,000- 10,000-20,000}}{\textup{Useful life}}$

also,

Depreciation expense = $5,000

thus,

$5,000 = $\frac{\textup{50,000- 10,000-20,000}}{\textup{Useful life}}$

or

useful life = $\frac{\textup{50,000- 10,000-20,000}}{\textup{5,000}}$

or

useful life = 4 years