- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 26. Long-lived Assets
- Subject 3. Depreciation Methods
CFA Practice Question
A company has property, plant and equipment listed at an original cost of $6,000,000. Land worth $1,000,000 is included in this cost. The depreciation expense for the year is $500,000. What is the average life of the firm's fixed assets?
A. 11 years
B. 10 years
C. 12 years
Explanation: The average life can be calculated by dividing the original cost by the depreciation expense. Land should be deducted, as it is not depreciated. The average life is 10 years [($6,000,000 - $1,000,000)/$500,000].
User Contributed Comments 3
| User | Comment |
|---|---|
| iceluke | land is not depriciated |
| cahiz84 | land is not depreciated cos after 500 years, you still have that portion of land. |
| todolist | good question |