Question

"The company had acquired Property, Plant & Equipment costing $40,000 on January 1, 2010. Suppose that the depreciation on this Equipment was calculated to be $2,000 for 2010"

What are the accounts on the adjusting entry and how are their debits and credits affected?

Answer 1

The adjusting entry for the depreciation on the Equipment would involve two accounts: Depreciation Expense and Accumulated Depreciation. Depreciation Expense is debited for $2,000 to record the expense for 2010, while Accumulated Depreciation is credited for $2,000 to reflect the depreciation expense recorded in 2010.

Step-by-step explanation:

The adjusting entry for the depreciation on the Equipment would involve two accounts: Depreciation Expense and Accumulated Depreciation.

Depreciation Expense is an expense account that represents the portion of the Equipment's cost that has been allocated as an expense for the current period. It is classified as an operating expense on the income statement. In this case, the Depreciation Expense would be debited for $2,000 to record the expense for 2010.

Accumulated Depreciation is a contra-asset account that represents the total depreciation allocated to the Equipment over its useful life. It is classified as a negative amount on the balance sheet, reducing the net book value of the Equipment. In this case, the Accumulated Depreciation would be credited for $2,000 to reflect the depreciation expense recorded in 2010.