Martin Company paid $500,000 for a piece of equipment.Martin uses straight-line depreciation.Currently the equipment has a balance in the accumulated depreciation account of $200,000.If the asset has no residual value and an estimated life of 10 years,how many years has the asset been depreciated?

Question

Quizplus · Accepted Answer

Since the asset has no residual value, we can use the formula: Depreciation expense = Cost of asset / Useful life. 
The cost of the asset is $500,000 and the useful life is 10 years, therefore the annual depreciation expense is $50,000 ($500,000 / 10 years). 
If the accumulated depreciation account has a balance of $200,000, that means the asset has been depreciated for 4 years ($50,000 x 4 years = $200,000). 
Therefore, the correct answer is C) 4.

Martin Company Paid $500,000 for a Piece of Equipment