A machine,acquired for a cash cost of $15,000,is being depreciated on a straight-line basis of $2,700 per year.The residual value was estimated to be 10% of cost.The estimated useful life is
A)3 years.
B)4 years.
C)5 years.
D)6 years.

Question

Quizplus · Accepted Answer

The formula for straight-line depreciation is:
Depreciation Expense = (Cost - Residual Value) / Useful Life

We know that:
- Cost = $15,000
- Depreciation Expense = $2,700
- Residual Value = 10% of cost = 0.1 x $15,000 = $1,500

Substitute these values into the formula and solve for Useful Life:
$2,700 = ($15,000 - $1,500) / Useful Life
$2,700 = $13,500 / Useful Life
Useful Life = $13,500 / $2,700
Useful Life = 5 years

Therefore, the estimated useful life is 5 years, which is choice C.

A Machine,acquired for a Cash Cost of $15,000,is Being Depreciated