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12 August, 10:13

Suppose a manufacturing plant purchased a new heating system in December, 2015 and, after installing and testing the equipment, it was put into service on January 1, 2016. The total cost to put the equipment into service was $55,000; it is expected to have a useful life of 5 years and a salvage value of $5,000.

Record the Transaction:Using the straight-line method of depreciation, what will the entry be to record depreciation for the 6 months ending June 30, 2016?

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  1. 12 August, 10:32
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    Depreciation for 6 months ending June 30, 2016 is $ 5,000 and the accounting entry to record the transaction is:

    Depreciation Expense - Debit $ 5,000

    Allowance for Depreciation - Credit $ 5,000

    Explanation:

    The depreciation charge for the year is calculated as follows:

    Total cost of the equipment $ 55,000

    Salvage Value $ 5,000

    Net Depreciable value $ 50,000

    Estimated Useful Life 5 years

    Annual Depreciation expense (50000/5) $ 10,000

    Depreciation for 6 months (10000/2) $ 5,000
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