Question

ABC Company purchased a fixed asset for $5000. The estimated useful life of the asset is 5 years. To record one year of depreciation for the fixed asset, ABC Company would debit

A) Depreciation Expense
B) Accumulated Depreciation
C) Fixed Asset
D) Cash

Answer 1

ABC Company would debit A) Depreciation Expense to record one year of depreciation for a fixed asset, representing the expense on the income statement for that period.

Step-by-step explanation:

To record one year of depreciation for a fixed asset, ABC Company would debit Depreciation Expense. When a company purchases a fixed asset and estimates its useful life, it spreads out the cost of the asset over that useful life through a process called depreciation, which reflects the consumption of the asset's economic benefits over time. The journal entry to record depreciation includes a debit to Depreciation Expense, recognizing the expense on the income statement, and a credit to Accumulated Depreciation, which is a contra-asset account on the balance sheet that reduces the value of the fixed asset.