On October 1, 2021, Marshwinds Wind Turbine Company places a new asset into service. The cost of the asset is $ 8,000 with an estimated 5-year life and $ 2,000 residual value at the end of its useful life. What is the carrying amount of the long-lived asset on the December 31, 2021, balance sheet assuming that Marshwinds Wind Turbine Company uses the double diminishing-balance method of depreciation?
A) $ 5,200
B) $ 6,000
C) $ 7,200
D) $ 7,600

Question

Quizplus · Accepted Answer

The double diminishing-balance method calculates depreciation by applying a constant rate to the declining book value of the asset. The rate is double the straight-line rate. For a 5-year life, the straight-line rate is 20%, so the double rate is 40%. Depreciation for 3 months (October to December) is calculated as $8,000 * 40% * (3/12) = $800. The carrying amount is $8,000 - $800 = $7,200.

On October 1, 2021, Marshwinds Wind Turbine Company Places a New