Podcast
Questions and Answers
What is the effect on the accounting equation when a company records depreciation expense?
What is the effect on the accounting equation when a company records depreciation expense?
- Assets decrease and equity decreases. (correct)
- Assets decrease and equity increases.
- Assets increase and equity decreases.
- Assets and equity both increase.
A company purchases equipment for cash. How does this transaction impact the company's total assets?
A company purchases equipment for cash. How does this transaction impact the company's total assets?
- Total assets remain the same. (correct)
- It depends on the depreciation method used.
- Total assets increase.
- Total assets decrease.
Which of the following accounts is used to accumulate the depreciation of an asset over its useful life?
Which of the following accounts is used to accumulate the depreciation of an asset over its useful life?
- Retained Earnings
- Accumulated Depreciation (correct)
- Depreciation Expense
- Current Assets
What is the primary purpose of recording depreciation expense?
What is the primary purpose of recording depreciation expense?
Company A uses the straight-line method for depreciation. An asset was purchased for $100,000 with a salvage value of $20,000 and a useful life of 10 years. What is the depreciation expense for the first year?
Company A uses the straight-line method for depreciation. An asset was purchased for $100,000 with a salvage value of $20,000 and a useful life of 10 years. What is the depreciation expense for the first year?
Which of the following statements accurately describes the relationship between depreciation expense and accumulated depreciation?
Which of the following statements accurately describes the relationship between depreciation expense and accumulated depreciation?
A company initially recorded a transaction incorrectly, debiting Equipment and crediting Cash. What adjusting entry is needed if the transaction should have been a debit to Supplies Expense?
A company initially recorded a transaction incorrectly, debiting Equipment and crediting Cash. What adjusting entry is needed if the transaction should have been a debit to Supplies Expense?
Company B uses the double-declining balance method. An asset cost $50,000, with a five-year useful life and no salvage value. What is the depreciation expense in year 2?
Company B uses the double-declining balance method. An asset cost $50,000, with a five-year useful life and no salvage value. What is the depreciation expense in year 2?
If a company fails to record depreciation expense at year-end, what is the impact on the financial statements?
If a company fails to record depreciation expense at year-end, what is the impact on the financial statements?
What is the carrying amount (or book value) of an asset?
What is the carrying amount (or book value) of an asset?
Flashcards
Journal entry for depreciation
Journal entry for depreciation
The expense recognized for an asset's depreciation is debited, while accumulated depreciation, a contra-asset account, is credited.
Accumulated Depreciation
Accumulated Depreciation
The portion of an asset's cost that has been expensed over its useful life. It reduces the asset's book value.
Depreciation
Depreciation
The allocation of the cost of a tangible asset over its useful life. It represents the decrease in the asset's value.
Study Notes
- Johan's Hardware Shop purchased equipment worth R60 000.
- Depreciation for the year is estimated to be R6 000.
- The correct journal entry for recording depreciation at year-end includes:
- Debit: Depreciation Expense R6 000
- Credit: Accumulated Depreciation R6 000
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