Question

Which journal entry reflects the adjusting entry needed on December 31?:

Answer 1

Answer:

Dr. Depreciation Expense 40,000  

Cr. Accumulated Depreciation            40,000

Explanation:

Annual depreciation charge=cost-salvage value/useful life

cost is $1,000,000

salvage value is $200,000

useful life is 20 years

annual depreciation charge=($1,000,000-$200,000)/20=$40,000

every year end the depreciation expense account would debited with $40,000 while the accumulated depreciation would be credited with same amount.

The correct option is the last option,Dr depreciation expense $40,000 and Cr accumulated depreciation $40,000.

At the point there is no point posting directly into the asset account since the accumulated depreciation account is an offsetting account against the asset account in the balance sheet

Answer 2

Answer:

Debit depreciation expense account with $40,000

Credit Accumulated Depreciation with $40,000

Explanation:

BOC purchased the building last year.

This year makes it the 2nd year this building has been purchased

The asset value is $1,000,000

Less The Salvage Value is $200,000

The Depreciable value of Asset is $800,000

Life span of Asset is 20years.

Meaning every year, depreciation expense will be $800,000 divided by 20 = $40,000.

At the end of this year, the depreciation charge will be posted thus:

Debit depreciation expense account with $40,000

Credit Accumulated Depreciation with $40,000