Question

At the end of its first year, the trial balance of Pharoah Company shows Equipment 21,600 and zero balances in Accumulated Depreciation–Equipment and Depreciation Expense. Depreciation for the year is estimated to be4,200. Prepare the annual adjusting entry for depreciation at December 31.

Answer 1

To prepare the annual adjusting entry for depreciation at December 31, you need to recognize the depreciation expense and record the accumulated depreciation. This involves creating an adjusting entry that debits Depreciation Expense and credits Accumulated Depreciation–Equipment for the estimated depreciation amount. This entry will recognize the expense and increase the accumulated depreciation.

Step-by-step explanation:

The annual adjusting entry for depreciation at December 31 can be prepared by recognizing the depreciation expense and recording the accumulated depreciation. Since the trial balance shows Equipment at $21,600 and no balances in Accumulated Depreciation–Equipment and Depreciation Expense, we need to record the depreciation for the year which is estimated to be $4,200.

1. Create an adjusting entry that debits Depreciation Expense and credits Accumulated Depreciation–Equipment. The amount should be $4,200 for both accounts.
2. This adjusting entry will recognize the expense for the $4,200 depreciation and increase the accumulated depreciation by the same amount.

After this adjusting entry, the trial balance will reflect the correct depreciation expense and accumulated depreciation amounts.