A company purchases new equipment for $72,000 cash on August 1, 2018. At the time of purchase, the equipment is expected to be used in operations for four years (48 months) and have no resale or scrap value at the end. The company depreciates the equipment evenly over the 48 months ($1,500/month).

Record the adjusting entry for depreciation on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

The adjusting entry for depreciation on December 31, 2018:

Debit Depreciation expense $7,500

Credit Accumulated depreciation $7,500

Explanation:

The company purchases new equipment on August 1, 2018. At the time of purchase, the equipment is expected to be used in operations 48 months. The company depreciates the equipment evenly over the 48 months ($1,500/month). From August 1, 2018 to December 31, 2018, the equipment is expected to be used for 5 months.

Depreciation expense for 2018 = $1,500 x 5 = $7,500

The adjusting entry for depreciation on December 31, 2018:

Debit Depreciation expense $7,500

Credit Accumulated depreciation $7,500