Question

Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated that annual depreciation on the equipment will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800. Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150. Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400. Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200.

Answer 1

Answer: Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150

Explanation:

Depreciation is the decrease in fixed assets for use. At the end of each year the amount corresponding to the use of the assets is carried to accounting expenses, crediting the accumulated depreciation as a counterpart.

In this case it is only one month of depreciation, therefore if we know that annually the asset is going to depreciate US $ 1800, between twelve months it would be US $ 150, which would be due to expenses and credited to accumulated depreciation.