Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 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

Straight-line depreciation method means that the depreciation expense is spread out evenly over the useful life of the asset. In this case, the useful life is 10 years and the residual value is $50,000. Therefore, the depreciation expense per year is ($500,000-$50,000)/10 = $45,000.

The journal entry to record depreciation expense for 2021 would be:

Depreciation Expense             $45,000
Accumulated Depreciation    $45,000

So the answer is D - Depreciation Expense and a credit to Accumulated Depreciation for $45,000.

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