A company has assets that were originally purchased for $500,000. The assets hav

Question

A company has assets that were originally purchased for $500,000. The assets have an estimated useful life of five years and no residual value. The company uses the straight line method of depreciation. Which of the following is correct when journalizing the second year of depreciation?

a. Credit accumulated depreciation $100,000, debit depreciation expense $100,000; equity decreases in this period by $200,000 since it is the total of accumulated depreciation

b. Debit accumulated depreciation expense $200,000, debit depreciation expense $200,000; equity decreases by $100,000

c. Credit accumulated depreciation $100,000, debit depreciation expense $100,000; equity decreases by $100,000

d. Debit accumulated depreciation $200,000, credit depreciation expense $100,000 credit owner

Explanation / Answer

Answer is Option C Credit accumulated depreciation $100,000, debit depreciation expense $100,000; equity decreases by $100,000 The same entry happens in all 5 years after the purchase of Asset. And at the end of 5th year, The Asset account will be a Zero with no residual value

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