Holman company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method, and only prepares adjustments at year-end. the adjusting entry needed to record annual depreciation is:

Question

Business

Kaylynn Mcgrath

3 September, 07:27

Holman company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method, and only prepares adjustments at year-end. the adjusting entry needed to record annual depreciation is:

+1

Answers (1)

Know the Answer?

Cloe Hooper · Answer 1

Depreciation is a way not only to recognize the lost value over time of an asset, but also a way to recognize the expense of the asset over time. To this end, we want to see the value of the asset get smaller, and a piece of the asset on the the income statement ever period.

The depreciation base is 95,000 - 5,000 = 90,000, and the depreciation period is 90,000/15,000 = 6 years.

The journal entry every year will be

Dec. 31

Debit: Depreciation expense 15,0000

Credit: Accumulated Depreciation (15,000)

Accumulated depreciation is a * contra-asset * account on the balance sheet that reduces the value of the the depreciable asset.