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Homework answers / question archive / A depreciable asset currently has a $40,100 book value

A depreciable asset currently has a $40,100 book value

Accounting

A depreciable asset currently has a $40,100 book value. The company owning the asset uses straight-line depreciation. They paid $70,000 for this asset and consider it to have $1,000 salvage value with a 12-year useful life. How long has the company owned this asset?

    1. 5.2 years
    2. 7 years
    3. 10.2 years
    4. 12 years
    5. Cannot be determined from the given information

 

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 Answer:

a .

Step-by-Step explanation

Cost of asset = $70,000

Salvage Value = $1,000

Depreciable Value = Cost of Asset - Salvage Value = $70,000 - $1,000 = $69,000

Useful Life (years) = 12

Depreciation p.a (straight line method) = Depreciable Value/Useful Life = $69,000/12 = $5,750

Now,

Book Value of Asset = $40,100

Book Value of Asset = Cost of Asset - Accumulated Depreciation

$40,100 = $70,000 - Accumulated Depreciation

Accumulated Depreciation = $70,000 - $40,100 = $29,900

Also,

Accumulated Depreciation = Used Life*Depreciation p.a.

$29,900 = Used Life*$5,750

Used Life = $29,900/$5,750 = 5.2 years

  

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