Ellen's Antiques reported the following in its December 31, 2021, balance sheet: Equipment $ 4,000,000 Accumulated depreciation-equipment $ 3,150,000 In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost.

Required: Compute the average age of Ellen's equipment at 12/31/2020.

Question

Business

Jethro

4 November, 08:39

Ellen's Antiques reported the following in its December 31, 2021, balance sheet: Equipment $ 4,000,000 Accumulated depreciation-equipment $ 3,150,000 In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost.

Required: Compute the average age of Ellen's equipment at 12/31/2020.

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Answers (1)

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Vaughan · Answer 1

Answer:7 years

Explanation:

Depreciation per annum

Cost - salvage value / no of years

$4,000,000-400,000/8

= $450,000

Accumulated depreciation = depreciation per annum * no of year

Therefore no of years

= Cross multiply

Accumulated depreciation / depreciation per annum

=$ 3,150,000/$450,000

= 7 years.