On July 1, 2019, Pharoah Company purchased new equipment for $80,000. Its estimated useful life was 8 years with a $16,000 salvage value. On December 31, 2022, the company estimated that the equipment's remaining useful life was 10 years, with a revised salvage value of $5,000. (a) Correct answer iconYour answer is correct. Prepare the journal entry to record depreciation on December 31, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

The journal entry to record depreciation on December 31, 2019:

Debit Depreciation Expense $4,000

Credit Accumulated depreciation account $4,000

Explanation:

Assuming, the company uses straight-line depreciation method, Depreciation Expense per year is calculated by following formula:

Annual Depreciation Expense = (Cost of equipment - Salvage Value) / Useful Life

From July 1, 2019 to December 31, 2022

Annual Depreciation Expense = ($80,000 - $16,000) / 8 = $8,000

In 2019, the equipment had been used for 6 months

Depreciation Expense in 2019 = ($8,000/12) x 6 = $4,000

The journal entry to record depreciation on December 31, 2019:

Debit Depreciation Expense $4,000

Credit Accumulated depreciation account $4,000