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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? a. $78,000 b. $90,000 c. $108,000 d. $114,000

Respuesta :

Answer:

$9,000

Explanation:

Date of purchase = October 1, 2021

Cost of assets = $120,000

Salvage value = $30,000

Useful life = 5 years

Annual depreciation using straight line method

= ($120,000 - $30,000)/5

= $90,000/5

= $18,000

Annual depreciation using the double declining method

= 2 × $18,000

= $36,000

For 2021, the asset was used between October and December

Depreciation to be recognized = (3/12) × $36,000

                                                   = $9,000

The right answer is not given as a part of the options.

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