French Co Ltd has a machine with the following characteristics:
A more technically advanced machine is expected to be available in 8 years.
It is expected to continue operating efficiently for the next 13 years.
The product that the machine is used to produce is expected to have a viable market for the next 6 years.
What is the period of time that should be used as the useful life of the asset for the purpose of calculating depreciation?

Question

Quizplus · Accepted Answer

The useful life of the asset for the purpose of calculating depreciation should be the period during which the asset is expected to be economically viable, which is determined by the shortest of the given conditions. In this case, it's the product's viable market life of 6 years.

French Co Ltd Has a Machine with the Following Characteristics