Question

On January 1, the company purchased equipment that cost $10,000. The equipment is expected to be worth about (or has a salvage value of) $1,000 at the end of its useful life in five years. The company uses straight-line depreciation. It has not recorded any adjustments relating to this equipment during the current year.

Required:
Complete the necessary December 31 journal entry.

Answer 1

Answer:

December 31

Debit : Depreciation   $1,800

Credit : Accumulated Depreciation $1,800

Explanation:

Straight line method charges a fixed amount of depreciation based on the formula :

Depreciation Expense = Cost - Salvage Value ÷ Estimated Useful Life

Depreciation Expense = ($10,000 - $1,000) ÷ 5 = $1,800