If a fixed asset, such as a computer, were purchased on January 1 for $3,750 with an estimated life of 3 years and a salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is
A) Accumulated Depreciation Depreciation Expense
1,200
1,200
B) Depreciation Expense Accumulated Depreciation
1,200
1,200
C) Accumulated Depreciation Depreciation Expense
100
100
D) Depreciation Expense Accumulated Depreciation
100
100

Question

Quizplus · Accepted Answer

Under straight-line depreciation, the annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life. For this asset, it is ($3,750 - $150) / 3 = $1,200 per year, or $100 per month. The journal entry for monthly depreciation expense is to debit Depreciation Expense and credit Accumulated Depreciation for $100.

If a Fixed Asset, Such as a Computer, Were Purchased