Question

Purchased equipment for $109,000 using a note payable, due in 12 months plus 8% interest. The company also paid cash of $4,600 for freight and $5,200 for installation and testing of the equipment. The equipment has an estimated residual value of $16,800 and a ten-year service life Record the adjusting entry for depreciation on the equipment purchased on April 1, 2021, calculated using the straight-line method.

Answer 1

	Depreciation expense=(Cost-Residual value)/Useful life
	Cost of the equipment:
				$
	Purchase cost			109000
	Freight			4600
	Installation and testing			5200
	Total			118800
	Depreciation expense=(118800-16800)/10=$ 10200
	Equipment purchased on April 1.Hence,compute depreciation for 9 months (Apr 1 to Dec 31)
	Depreciation expense for 9 months=10200*(9/12)=$ 7650
	Adjusting entry:
	Date	Account titles				Debit	Credit
	Dec 31.	Depreciation expense				7650
		Accumulated depreciation					7650