X Company prepares annual financial statements. On January 1, 2012, it purchased

Question

X Company prepares annual financial statements. On January 1, 2012, it purchased a machine for $80,000. Its estimated useful life was 4 years and its estimated disposal value in 4 years was $6,000. Using straight-line depreciation, what is the adjusting entry on December 31, 2015?

a. Equipment and Retained Earnings both increase by $55,500
b. Equipment and Paid-In Capital both decrease by $20,000
c. Equipment and Retained Earnings both decrease by $18,500
d. Equipment and Paid-In Capital both decrease by $18,500
e. Equipment and Retained Earnings both decrease by $55,500
f. Equipment and Retained Earnings both decrease by $20,000

Explanation / Answer

Depreciation= (80000 - 6000) / 4 = 74000/4 = 18500

entry :

Depreciation expense(Retained earning )   debit   18500

Equipment   credit 18500

correct option is "C"-Equipment and Retained Earnings both decrease by $18,500

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.