On October 1, 2021, Holt Company places a new asset into service.The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life.What is the book value of the plant asset on the December 31, 2021, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation?

Question

Quizplus · Accepted Answer

Using the double-declining-balance method, the annual depreciation rate is calculated as 2/5 = 40% (double the straight-line rate of 20%). 
For the first year, the depreciation expense would be:
($120,000 - $0) x 40% = $48,000
The book value at the end of the year would be:
$120,000 - $48,000 = $72,000
Therefore, the book value of the plant asset on the December 31, 2021, balance sheet would be:
$72,000 + $30,000 (salvage value) = $102,000
Answer C ($108,000) is closest to $102,000.

On October 1, 2021, Holt Company Places a New Asset