CFA Practice Question

CFA Practice Question

The average age percentage of fixed assets using the straight-line method equals ______
A. Accumulated Depreciation/Depreciation Expense
B. Ending Gross Investment/Accumulated Depreciation
C. Accumulated Depreciation/Ending Gross Investment
Explanation: As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life.

User Contributed Comments 13

User Comment
cissy why not A? if there is salvage value, A is more accurate than D.
passerby A is the asset average age instead of average age percentage.
sekib Answer C is the relative age ( the answer is straight from White et al pg 273)
synner average age percentage = relative age
BastianJB 100 over ten years
year 5: acc depr: 50; end gross inv: 50; 50/50 = 1 (relative age???)
should be acc depr / initial invest ...
GeorgeC BastianJB it ending gross investment in that situation would = 100 so relative age would be 50/100 = 50% which is correct.
drricharddragon Avg Depreciable Life = Gross End Inv / Depr Exp
Avg Age = Accum Depr / Depr Exp
Relative Age = Accum Depr / Gross End Inv
mishis So this is true only for straight line? I don't get it. the question asks for average age which is A?! % of fixed asset means % of Gross end inv?
Cesarnew mishis read this q carefully. it asks not for "average age", but for "average age percentage". That is relative age.
mattg Really need to read each word of these questions carefully before answering ... :{
MaresaJaden thank you drricharddragon
jjhigdon Had to read this like 3 times. C is Average Age, question asks for average age percentage, otherwise or more commonly/correctly known as relative age. You sneaky SOBs....
farhan92 SOB's - that is putting it politely!
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