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X Company prepares annual financial statements. On January 1, 2012, it purchased

ID: 2484874 • Letter: X

Question

X Company prepares annual financial statements. On January 1, 2012, it purchased a machine for $80,000. Its estimated useful life was 6 years and its estimated disposal value in 6 years was $7,000. Using straight-line depreciation, what is the adjusting entry on December 31, 2015?

Options:
Equipment and Retained Earnings both increase by $36,500
Equipment and Paid-In Capital both decrease by $12,167
Equipment and Retained Earnings both decrease by $36,500
Equipment and Retained Earnings both decrease by $12,167
Equipment and Paid-In Capital both decrease by $13,333
Equipment and Retained Earnings both decrease by $13,333

Explanation / Answer

Equipment and Retained Earnings both decrease by $12,167

Working

Depreciation/Year = ($80000-$7000)/6 =$12167