Fred's Plumbing Service purchased tools for $4,000. They have an expected life of 40 months and no residual value. The adjusting journal entry for the month is

Question

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The adjusting entry for depreciation should debit Depreciation Expense and credit Accumulated Depreciation. Option A is incorrect because it does not credit Accumulated Depreciation, which would result in the book value of the equipment not being reduced. Option C is also incorrect because it debits Accumulated Depreciation, which is a contra-asset account and therefore needs to be credited to increase its balance. Option D is incorrect because it credits Equipment, which is an asset account that should not be credited for depreciation.

Fred's Plumbing Service Purchased Tools for $4,000