Newco Publishing Company purchased equipment at the beginning of 2016 for $200,000.The company decided to depreciate the equipment over an 8-year period using the straight-line method.The company estimated the equipment's residual value at $20,000.The journal entry to record depreciation expense for 2016 will

Question

Quizplus · Accepted Answer

To calculate annual depreciation for straight-line method, we need to subtract the residual value from the equipment cost and divide it by the useful life of the equipment:
($200,000 - $20,000) / 8 = $22,500 per year

Therefore, the journal entry to record depreciation expense for 2016 should increase Depreciation Expense and increase Accumulated Depreciation for $22,500.

Newco Publishing Company Purchased Equipment at the Beginning of 2016