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 2012 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 at the end of its 10-year useful life, the depreciable cost is $500,000 - $50,000 = $450,000. This means that each year the company can depreciate $450,000 / 10 years = $45,000.

The journal entry to record depreciation expense for 2012 will have a debit to Depreciation Expense and a credit to Accumulated Depreciation for $45,000. This is because depreciation expense is an expense account that is debited when recording the expense, and accumulated depreciation is a contra-asset account that is credited when recording the depreciation of the asset.  So, the correct answer is option D.

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