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The economic service life of an asset is the life that

  • A.maximises its equivalent uniform annual cost
  • B.equals its depreciable life for tax
  • C.the manufacturer states in the specification
  • D.minimises its equivalent uniform annual cost

Answer: D

Calculating the equivalent annual cost for each possible retention period and taking the smallest gives the economically best life. It is generally shorter than the physical life and rarely coincides with the life used for tax.

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