Andrew Autobody purchased a car jack for $15,000 on July 1.The estimated useful life of the car jack is 5 years.If the financial statements are prepared on December 31, Andrew should make the following adjusting journal entry:

Question

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The adjusting entry for depreciation on a car jack should be made at the end of the accounting period. The amount of depreciation to be charged to expense and credited to Accumulated Depreciation is determined by dividing the cost of the asset by its useful life. In this case, the cost of the car jack is $15,000 and its useful life is 5 years, so the annual depreciation expense is $3,000 ($15,000 ÷ 5 years). Since Andrew purchased the car jack on July 1, it means that half of the year's depreciation has already been recorded, so Andrew only needs to record the expense for the remaining half of the year, which is $1,500 ($3,000 ÷ 2). Therefore, the adjusting journal entry should be Debit Depreciation Expense $1,500, Credit Accumulated Depreciation $1,500. Choice A is the correct answer.

Andrew Autobody Purchased a Car Jack for $15,000 on July