At December 31,2010,Edgar Enterprises had equipment with a book value of $40,000.On December 31,2009,the book value was $55,000.The original cost of the equipment was $75,000.Assuming straight-line depreciation and no salvage value,what is the estimated economic life of the asset?

Question

Quizplus · Accepted Answer

The equipment depreciated by $15,000 over one year ($55,000 - $40,000). The total depreciation needed is $75,000 (original cost) - $0 (salvage value) = $75,000. Dividing the total depreciation by the annual depreciation ($75,000 / $15,000) gives an estimated economic life of 5 years.

At December 31,2010,Edgar Enterprises Had Equipment with a Book Value