Fireworks City
Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method.
-Refer to Fireworks City. Using the data for 2020, determine the average life of the company'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

Fireworks City
Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method. 
-Refer to Fireworks City. Using the data for 2020, determine the average life of the company'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 can be calculated by dividing the total depreciable cost by the annual depreciation expense. From the given data, the total depreciable cost for 2019 and 2020 is $725,000 + $785,000 = $1,510,000. The annual depreciation expense for 2020 is $377,500. Therefore, the average life of property, plant, and equipment is $1,510,000 / $377,500 = 4 years rounded to one decimal place. So, the correct choice is C.

Fireworks City Information for 2020 and 2019 Is Presented Below for This