Question

A business purchased equipment for $140,000 on January 1, 2017. The equipment will be depreciated over the four 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 equipment for the year 2017? (Assume the residual value of the acquired equipment to be zero.)

A. Debit $35,000 to Depreciation Expense'Equipment, and credit $35,000 to Accumulated Depreciation'Equipment.
B. Debit $28,000 to Depreciation Expense'Equipment, and credit $28,000 to Accumulated Depreciation'Equipment.
C. Debit $28,000 to Depreciation Expense, and credit $28,000 to Equipment.
D. Debit $140,000 to Equipment, and credit $140,000 to Cash.
E. None of the above

Answer 1

The correct adjusting entry is to debit $35,000 to Depreciation Expense and credit $35,000 to Accumulated Depreciation. Hence, option A is correct.

Step-by-step explanation:

The adjusting entry to record depreciation on equipment for the year 2017 using the straight-line depreciation method and assuming zero residual value is obtained by dividing the equipment's cost by its useful life. In this case, the equipment cost $140,000 and has a four-year useful life.

Resulting in annual depreciation of $35,000 ($140,000 ÷ 4 years = $35,000). The adjusting entry for the year 2017 would be: Debit Depreciation Expense for $35,000 and credit Accumulated Depreciation for the same amount. This reflects the expense recognition of the equipment's usage over the year.

The accumulated depreciation thus far. Therefore, the correct answer is: A. Debit $35,000 to Depreciation Expense’Equipment, and credit $35,000 to Accumulated Depreciation’Equipment.