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21 December, 13:26

Taylor and Sons buys equipment on Aug. 1, 2008 for $100,000 cash. They estimatethe equipment will have a salvage value of $13,000 and a useful life of 5 years. a. Write the journal entry to record depreciation for 2008.

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  1. 21 December, 13:44
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    Journal Entry

    Dr. Depreciation Expense $7,250

    Cr. Accumulated Depreciation $7,250

    Explanation:

    Depreciation is a expense which is charged against an asset over its useful life due to wear and tear of that asset. This expense is recorded as and Expense in Income statement and accumulated in an contra asset account asset account until the disposal of the asset.

    Cost of Equipment = $100,000

    Useful life of the asset = 5 years

    Salvage value of the asset = $13,000

    Depreciable value of the asset will be expenses equally every year over 5 years.

    Depreciable value = Cost of the asset - Salvage value = $100,000 - $13,000 = $87,000

    Depreciation Expense = Depreciable Value / Useful Life of the asset = $87,000 / 5 years = $17,400 per year

    As only 5 month have been passed in 2008, the depreciation expense account will be charged as follow

    Depreciation charge in 2008 = $17,400 x 5 / 12 = $7,250
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