Question

Blue Spruce Corp. purchased equipment for $17400 on December 1. It is estimated that annual depreciation on the computer will be $3480. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: _______
a. debit Depreciation Expense, $290; credit Accumulated Depreciation, $290.
b. debit Depreciation Expense, $13920; credit Accumulated Depreciation, $13920.
c. debit Equipment, $17400; credit Accumulated Depreciation, $17400.
d. debit Depreciation Expense, $3480; credit Accumulated Depreciation, $3480.

Answer 1

Answer:

a. debit Depreciation Expense                                    $ 290

             credit Accumulated Depreciation                                 $ 290

Explanation:

The depreciation has to be calculated for the month of December i.e one month.

The annual depreciation per the question is $ 3,480 so the monthly depreciation expense is $ 290.

The depreciation expense account is debited, and the credit is to accumulated depreciation account. The equipment account is not credited directly, This is to show the costs and the accumulated depreciation separately.

The equipment on the balance sheet is shown as net of accumulated depreciation.