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! |