Chambersburg Corp.
The following information is for Chambersburg Corp.for 2018 and 2017.Chambersburg uses the straight-line depreciation method.
$$\begin{array} { l r r }
& \underline { \mathbf { 2 0 1 8 } } & \underline { \mathbf { 2 0 1 7 } } \
\text { Property, plant, and equipment } & \$ 250,000 & \$ 190,000 \
\text { Accumulated depreciation } & 100,000 & 85,000 \
\text { Depreciation expense } & 62,500 & 47,500 \
\text { Net sales } & 1,000,000 & 900,000 \
\text { Average total assets }& 625,000 & 475,000
\end{array}$$
-Refer to the information for Chambersburg Corp. ?
Using the 2018 data,what is the average life of Chambersburg'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

Chambersburg Corp.
The following information is for Chambersburg Corp.for 2018 and 2017.Chambersburg uses the straight-line depreciation method.
 $$\begin{array} { l r r } 
& \underline { \mathbf { 2 0 1 8 } } & \underline { \mathbf { 2 0 1 7 } } \
\text { Property, plant, and equipment } & \$ 250,000 & \$ 190,000 \
\text { Accumulated depreciation } & 100,000 & 85,000 \
 \text { Depreciation expense } & 62,500 & 47,500 \
\text { Net sales } & 1,000,000 & 900,000 \
\text { Average total assets }& 625,000 & 475,000
\end{array}$$
-Refer to the information for Chambersburg Corp. ?
Using the 2018 data,what is the average life of Chambersburg'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 property, plant and equipment is calculated as the total depreciable cost divided by the annual depreciation expense. 
Total depreciable cost = beginning balance of PPE + PPE purchases - PPE disposals
Total depreciable cost for 2018 = $120,000 + $25,000 - $15,000 = $130,000
Annual depreciation expense = (Beginning balance + Ending balance) / 2 / Useful life
Annual depreciation expense for 2018 = ($120,000 + $135,000) / 2 / 30 = $4,500
Average life = $130,000 / $4,500 = 28.9 years ≈ 4.0 years (rounded to one decimal place)

Chambersburg Corp -Refer to the Information for Chambersburg Corp