Question

On October 1, 2013, Holt Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2013, balance sheet assuming that Holt Company uses the straight-line method of depreciation? A. $60,000 B. $72,000 C. $52,000 D. $77,000

Answer 1

D. $77,000

Step-by-step explanation:

Depreciation is the recording of asset expense due to its use. It is due to use of fair value of the asset after use. The expense value reduces the asset value over useful life period.

As per given data

Cost of Asset = $80,000

Useful life= 5 years

Salvage Value = $20,000

Asset is purchased on October 1, 2013 and on December 31, 2013 depreciation of only 3 months has accrued.

Depreciation per year = (Cost of Asset - Salvage Value) / Useful life = ($80,000 - $20,000)/ 5 = $12,000

Depreciation Expense for the year 2013 = $12,000 x 3/12 = $3,000

Book value of the asset is the net of accumulated depreciation of the asset. The accumulated depreciation on December 31, 2013, is $3,000

Book Value = Cost - Accumulated Depreciation = $80,000 - $3,000 = $77,000

Answer 2

D. $77,000

Step-by-step explanation:

Depreciation expense using the straight line depreciation method = (Cost of asset - Salvage value) / useful life

($80,000 - $20,000) / 5 = $12,000

Accumulated Depreciation between October 1, 2013 and December 31, 2013 = (3/12) x $12,000 = $3,000

Book value = Cost of asset - accumulated deprecation

= $80,000 - $3,000 = $77,000

I hope my answer helps you