Question

A business purchased equipment for on January 1 of the current year. The equipment will be depreciated over the five years of its estimated useful life using the straight-line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on the equipment for the end of the first year?

Answer 1

The adjusting entry for recording depreciation at the end of the first year involves a debit to Depreciation Expense and a credit to Accumulated Depreciation by the amount calculated by dividing the cost of the equipment by its useful life.

Step-by-step explanation:

The adjusting entry required to record depreciation on the equipment for the end of the first year involves debiting the Depreciation Expense account and crediting the Accumulated Depreciation account. Assuming the equipment has no salvage value, the amount of depreciation expense for one year would be calculated by dividing the cost of the equipment by its useful life. The adjusting entry for a piece of equipment with, for example, an original cost of $5,000 would be a debit to Depreciation Expense for $1,000 (i.e., $5,000 / 5 years) and a credit to Accumulated Depreciation for $1,000 on December 31.

Adjusting Entry Example:

• Debit Depreciation Expense: $1,000
• Credit Accumulated Depreciation - Equipment: $1,000