Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2013 will have a debit to
A)depreciation Expense and a credit to Accumulated Depreciation for $50,000.
B)accumulated Depreciation and a credit to Equipment for $50,000.
C)depreciation Expense and a credit to Equipment for $45,000.
D)depreciation Expense and a credit to Accumulated Depreciation for $45,000.

Question

Quizplus · Accepted Answer

Since the equipment has a residual value of $50,000, the depreciable cost will be $500,000 - $50,000 = $450,000. The straight-line depreciation method evenly distributes the depreciable cost over the useful life of the asset. Therefore, the annual depreciation expense will be $450,000 ÷ 10 = $45,000.

To record the depreciation expense for 2013, we will debit Depreciation Expense for $45,000 and credit Accumulated Depreciation for $45,000. Therefore, the correct choice is D. Choice A is incorrect because it incorrectly credits Accumulated Depreciation for the residual value. Choice B is incorrect because it credits Equipment for the residual value, which is not the correct method of accounting for depreciation. Choice C is incorrect because it credits Equipment, which is incorrect since Equipment is a debit balance account and we must credit Accumulated Depreciation instead.

Equipment with a Residual Value of $50,000 at the End