Chapter 3, Problem 3.7APE

To determine

Depreciation:

Depreciation is an accounting method which is used to allocate the value of fixed assets (except land), over a period of time due to use, wear and tear or obsolescence. It is also used to allocate the cost of asset over its life span.

Adjusting Entries:

Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.

Rule of Debit and Credit:

Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity.

Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.

To prepare: The adjusting entry for depreciation expense.