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On January 1, 2022 a company purchased new equipment for $50,000 cash. The company will depreciate the equipment evenly over its estimated useful life of 5 years (this is $10,000 per year). What adjusting entry should be made on December 31, 2022? (Assume that no financial statements were prepared during the year and no adjusting entries have been recorded.) Multiple Choice O Account Accumulated Depreciation Depreciation Expense Account Equipment Accumulated Depreciation Account Depreciation Expense Cash Account Depreciation Expense Accumulated Depreciation Debit 10,000 Debit 10,000 Debit 50,000 Debit 10,000 Credit 10,000 Credit 10,000 Credit 50,000 Credit 10,000

On January 1, 2022 a company purchased new equipment for $50,000 cash. The company will depreciate the equipment evenly over its estimated useful life of 5 years (this is $10,000 per year). What adjusting entry should be made on December 31, 2022? (Assume that no financial statements were prepared during the year and no adjusting entries have been recorded.) Multiple Choice O Account Accumulated Depreciation Depreciation Expense Account Equipment Accumulated Depreciation Account Depreciation Expense Cash Account Depreciation Expense Accumulated Depreciation Debit 10,000 Debit 10,000 Debit 50,000 Debit 10,000 Credit 10,000 Credit 10,000 Credit 50,000 Credit 10,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2022, a company purchased new equipment for $50,000 cash. The company will depreciate the equipment evenly over its estimated useful life of 5 years (this is $10,000 per year). What adjusting entry should be made on December 31, 2022? (Assume that no financial statements were prepared during the year and no adjusting entries have been recorded.) **Multiple Choice Options** 1. **Option 1:** - Account: Accumulated Depreciation - Debit: $10,000 - Account: Depreciation Expense - Credit: $10,000 2. **Option 2:** - Account: Equipment - Debit: $10,000 - Account: Accumulated Depreciation - Credit: $10,000 3. **Option 3:** - Account: Depreciation Expense - Debit: $50,000 - Account: Cash - Credit: $50,000 4. **Option 4:** - Account: Depreciation Expense - Debit: $10,000 - Account: Accumulated Depreciation - Credit: $10,000 In this context, Option 4 is the correct adjusting entry. The debit to Depreciation Expense represents the allocation of the equipment's cost to expense over its useful life, while the credit to Accumulated Depreciation reflects the total depreciation taken on the equipment up to the date of the financial statements.
Transcribed Image Text:On January 1, 2022, a company purchased new equipment for $50,000 cash. The company will depreciate the equipment evenly over its estimated useful life of 5 years (this is $10,000 per year). What adjusting entry should be made on December 31, 2022? (Assume that no financial statements were prepared during the year and no adjusting entries have been recorded.) **Multiple Choice Options** 1. **Option 1:** - Account: Accumulated Depreciation - Debit: $10,000 - Account: Depreciation Expense - Credit: $10,000 2. **Option 2:** - Account: Equipment - Debit: $10,000 - Account: Accumulated Depreciation - Credit: $10,000 3. **Option 3:** - Account: Depreciation Expense - Debit: $50,000 - Account: Cash - Credit: $50,000 4. **Option 4:** - Account: Depreciation Expense - Debit: $10,000 - Account: Accumulated Depreciation - Credit: $10,000 In this context, Option 4 is the correct adjusting entry. The debit to Depreciation Expense represents the allocation of the equipment's cost to expense over its useful life, while the credit to Accumulated Depreciation reflects the total depreciation taken on the equipment up to the date of the financial statements.
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