Final answer:
To determine the adjusting entry for depreciation of Merrigold Inc.'s machine at the end of 2012, the straight-line method is used, resulting in a half-yearly depreciation expense of $1,200 which is debited to Depreciation Expense and credited to Accumulated Depreciation - Machinery.
Step-by-step explanation:
The subject of this question is the computation of depreciation for accounting purposes within a business context. Merrigold Inc. purchased a machine on July 1, 2012, for $12,000, with a useful life of 5 years and no salvage value. To determine the adjusting entry for depreciation on December 31, 2012, we will use the straight-line depreciation method which is calculated by dividing the cost of the asset by its useful life.
The total annual depreciation expense is calculated as $12,000 (cost of the machine) divided by 5 years (useful life), which equals $2,400 per year. However, since the machine was in service for only 6 months of the year 2012, the company needs to account for half a year's worth of depreciation. Thus, the adjusting journal entry for the depreciation expense at the end of 2012 would be $1,200 (half of the annual depreciation).
The corresponding adjusting entry is:
Debit Depreciation Expense $1,200
Credit Accumulated Depreciation - Machinery $1,200