ACME Distribution, Inc. December 31, 2016 Adjusting Entries Continued 5) On July

Question

ACME Distribution, Inc. December 31, 2016 Adjusting Entries Continued 5) On July 31, 2016 the company purchased new warehouse equipment in the amount of $50,000. No depreciation has been recorded yet in 2016 for this new asset. It is estimated to have a usfuleof 7 years and a salvage value of $4,700. What is the depreciation expense for 2016 using the straight-line method? (Round answer to the nearest dollar and show your calculation below for full credit) Complete below the adjusting journal entry necessary for depreciation: Account description Debit Credit Post the above entry to the trial balance in the adjustment columns.

Explanation / Answer

Solution:

Cost of equipment = $50,000

Salvage value = $4,700

Life = 7 years

Annual depreciation - SLM = ($50,000 - $4,700) /7 = $6,471

Usage of equipment in 2016 = 5 months

Depreciation expense for 2016 = $6,471 * 5/12 = $2,696

Adjusting Journal Entries - Acme Distribution Inc. Date Particulars Debit Credit 31-Dec-16 Depreciation Expense Dr $2,696.00          To Accumulated Depreciation - Equipment $2,696.00 (To record depreciation on equipment)

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