Question

Q 9.32: On December 31, 2016, Weber Industries had on their books a delivery truck that was purchased for $23,000 and had accumulated $13,800 in depreciation. Annual depreciation is $2,300. On July 1, 2017, Weber Industries sold the truck for $9,000. If Weber Industries forgets to account for a partial year of depreciation for the truck, how will this affect their journal entry

Answer 1

Effect :

1. Depreciation Expense will be understated

2. Accumulated Depreciation is also understated.

Step-by-step explanation:

According to the matching principle, the depreciation expense is charged in the period it was incurred.

In 2017 , the year of sale, the asset was only used for 6 months until July 1, therefore a partial depreciation has to be recognized.

Depreciation Charge (Partial) = Annual Charge × Months during the year asset was in use.

= $2,300 × 6/12

= $1,150

The journal entry would be :

Depreciation Expense $1,150 (debit)

Accumulated Depreciation $1,150 (credit)

If Weber Industries forgets to account for a partial year of depreciation for the truck :

1. Depreciation Expense will be understated

2. Accumulated Depreciation is also understated.