Answer:
Journal Entry
Dr. Depreciation Expense $7,250
Cr. Accumulated Depreciation $7,250
Explanation:
Depreciation is a expense which is charged against an asset over its useful life due to wear and tear of that asset. This expense is recorded as and Expense in Income statement and accumulated in an contra asset account asset account until the disposal of the asset.
Cost of Equipment = $100,000
Useful life of the asset = 5 years
Salvage value of the asset = $13,000
Depreciable value of the asset will be expenses equally every year over 5 years.
Depreciable value = Cost of the asset - Salvage value = $100,000 - $13,000 = $87,000
Depreciation Expense = Depreciable Value / Useful Life of the asset = $87,000 / 5 years = $17,400 per year
As only 5 month have been passed in 2008, the depreciation expense account will be charged as follow
Depreciation charge in 2008 = $17,400 x 5 / 12 = $7,250
