Big Steel Co. has the following accounts: Current assets $10,000 Property, plant & equipment $240,000 Less: accumulated depreciation 100,000 140,000 Total assets $150,000 Gross profit $95,000 Depreciation expense $25,000 Tax expense $10,000 Net income $55,000 The average age of fixed asset is estimated to be: a. 4 years b. 2 years c. 3 years d. 1 year

4.8 years (which is approximately 5 years.)

Explanation:

Depreciation is the systematic allocation of cost of an asset to the income statement considering the estimated useful life of the asset.

The residual value is the estimated amount that will be received on the disposal of the asset after its useful life. Where not given, it may be taken to be zero.

Mathematically,

Depreciation = (cost - residual value)/estimated useful life

Let the estimated useful life be T

25,000 = 240,000/T

T = 240,000/25,000

= 4.8 years

it id the first and last option