Question

If a fixed asset, such as a computer, were purchased on January 1 for $3,750 with an estimated life of 3 years and a salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is:______ 1.200 1,200 $100 $100 a. Depreciation Expense 100 Accumulated Depreciation 100b. Depreciation Expense 1200 Accumulated Depreciation 1200 c. Accumulated Depreciation 100 Depreciation Expense 100d. Accumulated Depreciation 1200 Depreciation Expense 1200

Answer 1

The answer is A.

Dr Depreciation expense $100

Cr Accumulated depreciation $100

Step-by-step explanation:

The formula for depreciation using the straight-line method is:

(Cost of the asset - residual/salvage value) ÷ useful life of the asset.

Cost of the asset is $3,750

Salvage (residual) value is $150

Useful life is 3 years

So we have:

($3,750 - $150) ÷ 3years

=$3,600 ÷ 3

=$1,200

$1,200 is the depreciation expene for a year.

Therefore, monthly depreciation expense will be:

$1,200/100

=$100

According to the accounting rule, debit increases asset and expenses and vice-versa while credit decreases liability, equity, income and vice versa.

Dr Depreciation expense $100

Cr Accumulated depreciation $100