Question

Make a journal entry for the transaction and also an adjusted entry for the end of the year if necessary. On May 1, 2020, the company paid $40,000 cash to purchase equipment. The equipment's useful life is 10 years. The company uses straight-line depreciation method and assumes no residual value at the end of the 10th year,

Answer 1

Journal

May 1, 2020	Equipment	40,000
	Cash		40,000
Dec. 31, 2020	Depreciation expense	2,667
	Accumulated depreciation - Equipment		2,667

Cost of equipment = $40,000

Useful life = 10 years

Annual depreciation expense = Cost of equipment/Useful life

= 40,000/10

= $4,000

Depreciation expense for the year 2020 = Annual depreciation expense x 8/12

= 4,000 x 8/12

= $2,667