Question

On January 1, the company purchased equipment that cost $10,000. The equipment is expected to be worth about (or has a salvage value of) $1,000 at the end of its useful life in five years. The company uses straight-line depreciation. It has not recorded any adjustments relating to this equipment during the current year. Complete the necessary December 31 journal entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

To perform the straight-line depreciation, subtract the salvage value from the cost of the equipment, then divide by its useful life. The annual depreciation would thus be $1,800, which is recorded as a debit to Depreciation Expense and a credit to Accumulated Depreciation.

Step-by-step explanation:

The student's question is about straight-line depreciation calculation for equipment. As per the given scenario, an equipment purchased for $10,000 with a salvage value of $1,000 and a useful life of five years will depreciate in value every year until it reaches its salvage value at the end of its useful life.

To calculate the annual depreciation expense, we subtract the salvage value from the cost and then divide by the useful life:
Annual Depreciation Expense = (Cost - Salvage Value) / Useful Life = ($10,000 - $1,000) / 5 = $1,800.

Journal Entry on December 31

Debit: Depreciation Expense $1,800

Credit: Accumulated Depreciation $1,800

This journal entry records the annual depreciation expense, increasing the expense on the income statement and increasing accumulated depreciation on the balance sheet.

Answer 2

Step-by-step explanation:

Before passing the journal entry , first we have to compute the depreciation amount under straight line method.

The formula to compute depreciation expense is shown below:

=
`((original\ cost - salvage\ value))/(Number\ of\ years)\`

=
`((\$10,000 - \$1,000) )/(5\ years)\\`

= $1,800

The journal entry is shown below:

Jan 1 Equipment A/c Dr $10,000

To cash $10,000

(Being equipment is purchased)

Jan 31 Depreciation expense A/c Dr $1,800

To Accumulated depreciation $1,800

(Being depreciation expense recorded)