French Co Plc 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 should be the shortest of the three periods: the time until a more advanced machine is available (8 years), the time the machine can operate efficiently (13 years), and the market viability of the product (6 years). Therefore, the useful life is 6 years.

French Co Plc Has a Machine with the Following Characteristics