Fireworks City Information for 2012 and 2011 is presented below for this company which uses the straight-line depreciation method.
$\begin{array}{l}
\begin{array}{lll}
\
\text { Property, plant and equipment }\
\text { Accumulated depreciation }\
\text {Depreciation expense }\
\text {Net sales }\
\text { Total assets }\
\end{array}
\begin{array}{lll}
\underline{ 2012 }& \underline{ 2011 } \
{ \$750,000 } & { \$ 190,000 } \
100,000 & 85,000 \
62,500 & 47,500 \
1,000,000 & 900,000 \
625,000 & 475,000
\end{array}
\end{array}$
-Refer to Fireworks City.Using the data for 2012,determine the average life of the company's property,plant,and equipment rounded to one decimal place.
A)1.6 years
B)2.5 years
C)4.0 years
D)10.0 years

Question

Fireworks City Information for 2012 and 2011 is presented below for this company which uses the straight-line depreciation method.
$\begin{array}{l}
\begin{array}{lll}
\
\text { Property, plant and equipment  }\
\text { Accumulated depreciation   }\
\text {Depreciation expense }\
\text {Net sales }\
\text { Total assets }\
\end{array}
\begin{array}{lll}
 \underline{ 2012 }&  \underline{ 2011 } \ 
 { \$750,000 } & { \$ 190,000 } \
100,000 & 85,000 \ 
62,500 & 47,500 \ 
1,000,000 & 900,000 \ 
625,000 & 475,000
\end{array}
\end{array}$ 
-Refer to Fireworks City.Using the data for 2012,determine the average life of the company's property,plant,and equipment rounded to one decimal place.
A)1.6 years
B)2.5 years
C)4.0 years
D)10.0 years

Quizplus · Accepted Answer

The average life of the company's property, plant, and equipment is calculated by dividing the net property, plant, and equipment by the depreciation expense. The net property, plant, and equipment is $750,000 - $100,000 = $650,000. The depreciation expense is $62,500. Therefore, the average life of the company's property, plant, and equipment is $650,000 / $62,500 = 10.4 years, which rounds to 10.0 years.

Fireworks City Information for 2012 and 2011 Is Presented Below