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On April 1, 2020, ABC Company acquired a machine for $1,000,000 in cash. It estimates that...

On April 1, 2020, ABC Company acquired a machine for $1,000,000 in cash. It estimates that the machine will have a useful life of 4 years and a salvage value of $200,000. Show the journal entry for the depreciation expense related to this machine for year 2020.

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Answer- The journal entry for the depreciation expense related to this machine for year 2020 are as follows-

DATE ACCOUNTS TITLES & EXPLANATION DEBIT CREDIT
$ $
Dec. 2020 Depreciation expense 150000
Accumulated depreciation 150000
(Being entry recorded.)

Explanation- Straight line Method- Annual depreciation expense-

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($1000000 - $200000)/4 years

=$390000/4 years

= $200000

Depreciation expense for year 2020= ($200000*9 months/12 months)

= $150000

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