Question

Juan Foods purchases a computer system in 2015 for $20,000. Its expected useful life is 5 years. At the end of 2015, it has to record depreciation on the computer system of $2,000. What is the correct journal entry to record the depreciation

Answer 1

Answer:

A debit to Depreciation Expense

A credit to Accumulated Depreciation

Depreciation Expense          $2000

                            Accumulated Depreciation                        $2000

Explanation:

The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive asset to the revenues earned from using the asset. It is difficult to precisely match the contribution of the asset to a company's revenues, so the asset cost is designated to the years in which the asset is used.  

The accounting entry is:

A debit to Depreciation Expense

A credit to Accumulated Depreciation

Depreciation Expense          $2000

                            Accumulated Depreciation                        $2000