In a given period, the firm's beginning gross investment is 6,000 and ending gross investment is 10,000. The accumulated depreciation at the beginning was 500 and the ending balance in this account was 1,500. The firm uses straight-line depreciation. Then, the average depreciable life of the firm's assets is ________.
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A. B. C. D.C
Note that: Average depreciable life = Ending Gross Investment/Depreciation expense. Depreciation expense = 1,500-500 = 1,000. Hence, ADL = 10,000/1,000 =
10 years.
To calculate the average depreciable life of the firm's assets, we need to use the formula:
Average Depreciable Life = (Beginning Gross Investment - Ending Gross Investment) / (Beginning Accumulated Depreciation - Ending Accumulated Depreciation)
Let's substitute the given values into the formula:
Beginning Gross Investment = $6,000 Ending Gross Investment = $10,000 Beginning Accumulated Depreciation = $500 Ending Accumulated Depreciation = $1,500
Average Depreciable Life = ($6,000 - $10,000) / ($500 - $1,500)
Simplifying the equation further:
Average Depreciable Life = (-$4,000) / (-$1,000)
Now, let's divide the numerator and denominator by 1,000:
Average Depreciable Life = 4
Therefore, the average depreciable life of the firm's assets is 4 years.
None of the provided answer choices match the calculated result. It's possible that there might be an error in the question or answer options. You should double-check the information provided or consult with the exam provider for clarification.