On October 1, 2017, Hess 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, 2017, balance sheet assuming that Hess Company uses the double-declining-balance method of depreciation?
A)$78,000.
B)$90,000.
C)$108,000.
D)$114,000.

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 the double rate is 40%. For 3 months (Oct-Dec), the depreciation is $120,000 * 40% * (3/12) = $12,000. The book value is $120,000 - $12,000 = $108,000.

On October 1, 2017, Hess Company Places a New Asset