Question

Prepare the adjusting journal entries for ten years of an equipment's life. Cost of equipment $60,000. They will last 10 years. The salvage value will be $5,000. The depreciation rate is 10% per year. Prepare ten Adjusting entries for this equipment using each of the two methods: a. The Straight Line Method and b. The Declining Balance Method.

Answer 1

Prepare Depreciation schedule as per Double Declining method:

Assume Asset purchase on January 2000

Double declining rate = Depreciation rate   2

= 10% 2 = 20%

________________________________________________________________

Prepare Adjusting Entries as follows:

Date	Account Titles	Debit	Credit
2000	Depreciation Expense	$12,000
	Accumulated depreciation		$12,000
2001	Depreciation Expense	$9,600
	Accumulated depreciation		$9,600
2002	Depreciation Expense	$7,680
	Accumulated depreciation		$7,680
2003	Depreciation Expense	$6,144
	Accumulated depreciation		$6,144
2004	Depreciation Expense	$4,915
	Accumulated depreciation		$4,915
2005	Depreciation Expense	$3,932
	Accumulated depreciation		$3,932
2006	Depreciation Expense	$3,146
	Accumulated depreciation		$3,146
2007	Depreciation Expense	$2,517
	Accumulated depreciation		$2,517
2008	Depreciation Expense	$2,013
	Accumulated depreciation		$2,013
2009	Depreciation Expense	$1,611
	Accumulated depreciation		$1,611

__________________________________________________________________________

Compute Depreciation as per Straight Line Method:

Annual Depreciation = [Cost - Salvage value]   Useful Life

= [$60,000 - $5,000] 10 years

= $5,500 per year

____________________________________________________________

Prepare Adjusting Entries as per S.L.M as follows:

Date	Account Titles	Debit	Credit
2000	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2001	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2002	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2003	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2004	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2005	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2006	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2007	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2008	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500
2009	Depreciation Expense	$5,500
	Accumulated depreciation		$5,500

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