MAC's Airport Parking purchased two vans for the business on 1 January 2018. The vans cost $80 000 each and have a useful life of 5 years with an expected residual of $10 000 each. The adjusting entry for depreciation on 30 June 2018, using the straight-line method, is:

Question

Quizplus · Accepted Answer

The straight-line method of depreciation allocates an equal amount of depreciation expense for each year of the asset's useful life. To calculate the annual depreciation expense for each of the two vans, we subtract the expected residual value of $10,000 from the initial cost of $80,000, giving us a depreciable amount of $70,000. Dividing this amount by the useful life of 5 years gives us an annual depreciation expense of $14,000 for each van. Thus, the adjusting entry for depreciation on 30 June 2018 will be DR Depreciation Expense $14,000 and CR Accumulated Depreciation $14,000 for each van, for a total of DR Depreciation Expense $28,000 and CR Accumulated Depreciation $28,000. Therefore, the best choice is B.

MAC's Airport Parking Purchased Two Vans for the Business on 1