Redhouse Corporation purchased a truck for $20,000 on January 1, 2023. The truck has an estimated salvage value of $5,000 and is expected to last five years. Redhouse Corporation prepares adjusting entries only at year-end. Which of the following is the necessary adjusting entry on December 31, 2023? (See your Chapter 3 notes, page 6) Debit Depreciation Expense—Trucks for $4,000, and credit Accumulated Depreciation—Trucks for $4,000. Debit Depreciation Expense—Trucks for $5,000, and credit Accumulated Depreciation—Trucks for $5,000. Debit Accumulated Depreciation—Trucks for $3,000, and credit Depreciation Expense—Trucks for $3,000. Debit Depreciation Expense—Trucks for $3,000, and credit Accumulated Depreciation—Trucks for $3,000. Debit Accumulated Depreciation—Trucks for $4,000, and credit Depreciation Expense—Trucks for $4,000. Debit Accumulated Depreciation—Trucks for $5,000, and credit Depreciation Expense—Trucks for $5,000.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Redhouse Corporation purchased a truck for $20,000 on January 1, 2023. The truck has an estimated salvage value of $5,000 and is expected to last five years. Redhouse Corporation prepares
Debit
Debit Depreciation Expense—Trucks for $5,000, and credit Accumulated Depreciation—Trucks for $5,000.
Debit Accumulated Depreciation—Trucks for $3,000, and credit Depreciation Expense—Trucks for $3,000.
Debit Depreciation Expense—Trucks for $3,000, and credit Accumulated Depreciation—Trucks for $3,000.
Debit Accumulated Depreciation—Trucks for $4,000, and credit Depreciation Expense—Trucks for $4,000.
Debit Accumulated Depreciation—Trucks for $5,000, and credit Depreciation Expense—Trucks for $5,000.
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