Question

On July 1, 2019, Ivanhoe Company purchased new equipment for $90,000. Its estimated useful life was 5 years with a $12,000 salvage value. On December 31, 2022, the company estimated that the equipmentâs remaining useful life was 10 years, with a revised salvage value of $5,000.

Prepare the journal entry to record depreciation on December 31, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

The journal entry to record depreciation on December 31, 2019 for the equipment is:

Depreciation Expense: $7,200
Accumulated Depreciation: $7,200

Step-by-step explanation:

The journal entry to record depreciation on December 31, 2019 would be:

Depreciation Expense $7,200

Accumulated Depreciation $7,200

To calculate the depreciation expense, we need to determine the annual depreciation using the straight-line method. The formula for straight-line depreciation is:

Depreciation Expense = (Cost - Salvage Value) / Useful Life

For the equipment purchased on July 1, 2019, the cost is $90,000 and the salvage value is $12,000. The useful life as of December 31, 2019 is 4.5 years (half a year has passed since the purchase date). Plugging in the values:

Depreciation Expense = ($90,000 - $12,000) / 5 = $15,600

Since half a year has passed, we need to calculate the depreciation for that period:

Depreciation Expense = $15,600 * 0.5 = $7,800

However, the question asks for the depreciation as of December 31, 2019, so we need to adjust the depreciation for the remaining 0.5 year according to the revised useful life:

Revised Depreciation Expense = $7,800 * (10 - 0.5) / 10 = $7,200

Answer 2

Journal entry

Step-by-step explanation:

The journal entry to record the depreciation expense is shown below:

Depreciation Expense A/c Dr $7,800

To Accumulated Depreciation - Equipment A/c $7,800

(Being depreciation expense is recorded)

The computation is shown below:

= ($90,000 - $12,000) ÷ 5 years × 6 months ÷ 12 months

= $7,800

The six months is calculated from July 1, 2019 to December 31, 2019