Question

If the equipment had an original useful life of 7 years, and is depreciated straight line,...

If the equipment had an original useful life of 7 years, and is depreciated straight line, when will new equipment probably need to be purchased?

a. now

b. 2 years

c. 5 years

d. cannot be estimated

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Answer #1

Answer:
d. cannot be estimated

Explanation:
The useful life of an asset depends on various factors and can be estimated in many different ways. This may include the age of the asset when it was purchased by the organisation, how frequently the asset is being utilized in the organisation and changes in the economy with regard to technology. Mere estimation of the fact that an equipment will have a useful life of 7 years doesn’t mean that a new equipment will be purchased only after 7 years. Due to the dynamic nature of business environment there might be a need to upgrade the equipment to a new one in the 1st year of its useful life itself. Therefore, when a new equipment should be probably purchased cannot be estimated.

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