On October 1, 2010, Holt Company places a new asset into service. The cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2010, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation?
A) $39,000
B) $45,000
C) $54,000
D) $57,000

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so double is 40%. For 3 months (Oct-Dec), the depreciation is 40% of $60,000 prorated for 3/12 of a year: $60,000 * 40% * (3/12) = $6,000. The book value is $60,000 - $6,000 = $54,000.

On October 1, 2010, Holt Company Places a New Asset