BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Bichon Company purchased equipment for $6, 720 on December 1. It is estimated that annual depreciation on the equipment will be $1, 680. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:
|
|
Debit Depreciation Expense, $1, 680; Credit Accumulated Depreciation, $1, 680.
|
|
|
Debit Depreciation Expense, $140; Credit Accumulated Depreciation, $140.
|
|
|
Debit Depreciation Expense, $5, 040; Credit Accumulated Depreciation, $5, 040.
|
|
|
Debit Equipment, $6, 720; Credit Accumulated Depreciation, $7, 200.
|
Explanation:
Detailed explanation-1: -Debit accumulated depreciation Rs. 2, 000; credit depreciation expense Rs. 2, 000.
Detailed explanation-2: -The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).
Detailed explanation-3: -Depreciation expense is reported on the income statement as any other normal business expense. 3 If the asset is used for production, the expense is listed in the operating expenses area of the income statement.
There is 1 question to complete.