Answer:
If the adjusting entry is recorded at the end of the year
$1,800 debited to Depreciation expense: Equipment
$1,800 credited to Accumulated Depreciation: Equipment
If the adjusting entry is recorded at the end of the month
$150 debited to Depreciation expense: Equipment
$150 credited to Accumulated Depreciation: Equipment
Explanation:
The adjusting entry related to the equipment is that of recording depreciation expense for the equipment. To record this entry, we need to compute the depreciation expense first. Annual depreciation expense can be computed using the following formula
Annual depreciation expense = (Cost - Residual value)/Useful life of the asset
Plugging the values into the above formula, we get
Annual depreciation expense = (10,000 - 1,000)/ 5 = 9,000/5 = 1,800
Now we debit Depreciation expense: Equipment by $1,800 and credit Accumulated Depreciation: Equipment by $1,800
However, if the adjusting entry is made on a monthly basis, we would need to divide the annual depreciation by 12
1,800/12 = $150
In this case, we would have to debit Depreciation expense: Equipment by $150 and credit Accumulated Depreciation: Equipment by $150
If the adjusting entry is recorded every two months during the year. The monthly depreciation expense would be multiplied by 2 to get the amounts that need to be debited and credited to the accounts mentioned above
