Calculating depreciation accurately and recording it promptly can help reduce your taxes, provide investors with a much better picture of your business finances, and ensure that your balance sheet and income statement are accurate. Place the steps in the adjustment process in the correct order. When an asset is purchased, it depreciates by some amount every month. Adjusting entries for depreciation is a little bit different than with other accounts. The Accumulated Depreciation account is captured under the asset heading of Property Plant and Equipment (PP&E ). Source documents, journal, ledger, work sheet, financial statements, The most efficient sources for closing entry information are the, The post-closing trial balance will include, The Adjusted balances for Tomas Co. are listed below. Fundamentals of Financial Management, Concise Edition, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Financial Accounting: An Introduction to Concepts, Methods and Uses, Clyde P Stickney, Jennifer Francis, Katherine Schipper, Roman L Weil. (Check all that apply), a. Taggert will credit Prepaid Insurance for $300 on Sept. 30. After all of the account balances have been extended to the balance sheet columns of the. Increase to Income Taxes Payable and Increase to Income Taxes Expense. These entries are posted into the general ledger in the same way as any other accounting journal entry. The business records depreciation once a year on December 31. For 2018, the depreciation expense would be: $6,000 x 9/12 = $4,500. In the illustration above, the depreciation expense is $6,000 for 2018, $6,000 for 2019, $6,000 for 2020, etc. Which of the following statements are CORRECT regarding the accounting for this insurance over the 6-moth period? Course Hero is not sponsored or endorsed by any college or university. There are numerous depreciation methods that you can use, but most businesses use one of these four methods: Straight line depreciation is the easiest depreciation method to use. How Do I Time Income and Expenses at the End of the Tax Year? Existinghome sales also increased in the best year since 2006. For example, if you make 35,000 copies the first year, youll calculate depreciation as follows: Units of production depreciation will change monthly, since its based on machine or equipment usage. WebExpert Answer. $$ Thanks. (Check all that apply), The Accounts Receivable account should be ________ when adjusting at the end of the period for any revenues that have been earned but not yet collected or recorded. Cash of $350,000 is collected from the sale. We need to prorate. Which 2 accounts are used to record the adjusting entry for the amortization of long-term assets that lack physical substance? How Much Does Home Ownership Really Cost? (h) Made an adjusting entry to accrue interest on the loan in 950, has been owned. To make an adjusting entry for wages paid to an employee at the end of an accounting period, an adjusting journal entry will debit wages expense and credit wages payable. b. Prepaid rent expired during the month. Transactional MethodYou should ensure that the details in the previous year are stated before the correctionYou should open the current accounting periodSelect Postings on the left hand menuBring Forward Opening Balances - this will ensure that the P&L b/f code (8000) will have the incorrect brought forward balanceGo back to last year's accounting periodMore items All rights reserved. If the estimated depreciation for office equipment were $42,000, what would the adjusting entry contain? \hline 1 & \$ 3000 & \$ 6000 \\ Publication 946, How to Depreciate Property, Copyright, Trademark and Patent Information. To learn about how we use your data, please Read our Privacy Policy. \text{Utilities expense } & \text{530} & \quad & \square \square & \square \square\\ Assets depreciate by some amount every month as soon as it is purchased. \text{Salary expense } & \text{2,600} & \quad & \square \square & \square \square\\ WebThe adjusting entry to record depreciation for an asset will be: Depreciation Expense Dr. To Accumulated Depreciation The effects of this transaction will be: Depreciation expense will increase the expenses and decrease net income. The decision to start a second production shift. Stockton Company Adjusted Trial Balance 31-Dec Cash 7,530 Accounts Receivable 2,100, Use the adjusted trial balance for Stockton Company below to answer the questions that follow. (Select all that apply). We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. After the adjustments have been completed, the adjusted balance in the "Salaries and Wages Payable" account represents wages incurred, but not yet ______ by the company. Prepare the adjusting entry for March and show the adjustment using written down method (WDM) for depreciation recording. Understanding Homeowners Insurance Premiums, Guide to Homeowners Insurance Deductibles, Best Pet Insurance for Pre-existing Conditions, What to Look for in a Pet Insurance Company, Marcus by Goldman Sachs Personal Loans Review, The Best Way to Get a Loan With Zero Credit. Using depreciation allows you to avoid incurring a large expense in a single accounting period, which can severely impact both your balance sheet and your income statement. is what the adjustment will look like; Depreciation Expense $1,500, Accumulated Depreciation $1,500, Land Improvements: Depreciation, and How To Account For It, Depreciation Expenses: Definition, Methods, and Examples, What Is the Residual Value of Fixed Assets and How to Calculate It, Top 5 Depreciation and Amortization Methods (Explanation and Examples), Fixed Assets (IAS 16): Definition, Recognition, Measurement, Depreciation, and Disclosure, How To Move Your Accounting Processes To The Cloud, 3 Types of Corporate Strategies (Explanation, Advantages, and Limitations), Why is Working Capital Negative? Under the straight line method, the cost of the fixed asset is distributed evenly over the life of the asset. This method is not preferred by the International Accounting Standards. (f) Made an adjusting entry to record depreciation of the equipment in item (e), \$1,200. You make the adjusting entry by debiting accounts receivable and crediting service revenue. If youre recording depreciation monthly, youll do a second calculation: With this method, your monthly depreciation amount will remain the same throughout the life of the asset. (Enter one word per blank). This site uses cookies. (h) Made an adjusting entry to accrue interest on the loan in item (g), \$60. \text{Supplies} & \text{2,400 } & \quad & \square \square & \square \square\\ The entry to record the $6,000 depreciation every year would be: Depreciation Expense: An expense account; hence, it is presented in the income statement. The same principles we discuss in the previous point apply to revenue too. (Enter one word per blank), Which of the following accounts found on an adjusted balance typically require adjusting entries? \hline 3 & \$ 5000 & \$ 3000 \\ Purchases of new U.S. homes surged in December and 2015 was the best year for Likewise, payroll expenses are often out of sync with your business accounting ledger until afterward. Depreciation Expense= (Cost of Asset-Residual Value)/ Estimated life of Asset. If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience. Depreciation for the final eight months that it was used in Year Three is $76,000 (8/12 of $114,000). What Types of Homeowners Insurance Policies Are Available? It is measured from period to period. The most common and simplest is the straight-line depreciation method. In this case we cannot apply the entire annual depreciation in the year 2018 because the van has been used only for 9 months (April to December). An updated table is available in Publication 946, How to Depreciate Property. \text{Cost of merchandise returned by customers and restored to inventory} \ldots\ldots\ldots & \text{2,100}\\ This cost is recognized as an asset and not expense. 1). (Select all that apply), a. The employees of Sinclair Services, Inc. worked the last two weeks of December. Alternatively, you can use "months" instead of "years" for useful life. Consider the unadjusted trial balance of Princess, Inc., at August 31, 2012, and the related month-end adjustment data. Ramchandran, N., & Kakani, R. K. (2007). In each accounting year/period a portion of the cost expires and needs. Here After adjusted entries are made in your accounting journals, they are posted to the general ledger in the same way as any other accounting journal entry. The adjusting entry to record the depreciation of equipment for the fiscal period is. A prepayment that is originally recorded as an asset will be _____. The journal entry is used to record depreciation expenses for a particular accounting period and can be recorded manually into a ledger or in your accounting software application. (adsbygoogle = window.adsbygoogle || []).push({}); >>> Further Practice Adjusting Entries Problems and Solutions. Wages paid to an employee is a common accrued expense. Temporary accounts include _______, ________, and _______. housing since 2007. An expense that has incurred but not yet paid is called a(n) __________. \begin{matrix} Straight-line depreciation expense is computed using this formula: Historical Cost Residual ValueEstimated Useful Life, Historical Cost: Purchase price and all incidental cost of the assetResidual Value or Scrap Value: Estimated value of the fixed asset at the end of its useful lifeUseful Life: Amount of time the fixed asset can be used (in months or years). Revenue that has been earned but not yet collected in cash is called a(n) ___________. The purpose of adjusting entries is to show when money changed hands and to convert real-time entries to entries that reflect your accrual accounting. The furnitures expected useful life is three years. If you're using an accrual accounting system, money doesn't necessarily change hands at that time of the accounting entry; the purpose of adjusting entries is to show when the money was officially transferred, and to convert your real-time entries to entries that accurately reflect your accrual accounting system. Therefore, the $1,500 adjusting entry should be made to rectify the amount of accumulated depreciation account. WebDepreciation expense = ($1,770 $150) / (3 x 12) = $45 per month In this case, we can make the journal entry of depreciation expenses in the June 30 adjusting entry as below: This journal entry is necessary for the company to present an actual net book value of its total assets as well as a more realistic view of its profit in June 2020. Insurance expires at the rate of $560 per month. Most of the firms use the straight-line method for depreciation purposes. To ensure that all assets and liabilities are reported at appropriate amounts After the adjustments have been completed, the adjusted balance in Income Tax Payable represents the amount There are several types of adjusting entries that can be made, with each being dependent on the type of financial activities that define your business. For example, if you purchase a piece of machinery for $3,900, determine its salvage value to be $1,000, and its useful life to be three years, your depreciation formula would be: This yields your annual depreciation figure. When a Petty Cash Fund has been established, which of the following relationships should be true at all times? Draw arrows linking the three statements. Adjustments ensure that _______ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods. b. allocated to future accounting periods based on the value of the benefit used during the period, Place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order, The _______ recognition principle requires that a portion of long-lived assets be transferred to an expense account during the accounting period the asset is being used to generate revenues. Set up T-accounts for Merchandise Inventory and Cost of Goods Sold. Prior to recording a journal entry, be sure that you have created a contra asset account for your accumulated depreciation, which will be used to track your accumulated depreciation expense entries to date. \text{Prepaid rent} & \text{2,100 } & \quad & \square \square & \square \square\\ By subscribing, you agree to receive communications from FreshBooks and acknowledge and agree to FreshBooks Privacy Policy. b. A common example of a prepaid expense is a company buying and paying for office supplies. Save my name, email, and website in this browser for the next time I comment. Then record the summarized activities in those T-accounts and compute account balances. Accrued Expenses: A good example of accrued expenses is wages paid to employees. c. The account represents tax refunds due to the company, Which action will be taken in the adjusting entry to record rent expense that has expired during the month? Required fields are marked *. Double declining depreciation calculates depreciation at twice the rate as straight-line and uses book value, which is the value of the asset according to your general ledger (rather than the original cost of the asset), to calculate depreciation for subsequent years. Best Homeowners Insurance for New Construction, How to Get Discounts on Homeowners Insurance. Explain how a surge in new home sales affects real GDP. I thought u would credit Depreciation Expense, Office Equipment for 42000, but I don't know if that is right?? Which is an advantage of a sole proprietorship form of business? Which of the following is incorrect regarding the Income Tax Payable account? That includes your income statements, profit and loss statements and cash flow ledgers. To record depreciation using the straight-line example above, you need to make the following journal entries: If youre lucky enough to use an accounting software application that includes a fixed assets module, you can record any depreciation journal entries directly in the software. government. \begin{matrix} The five-day weekly payroll is$5,100 and will be paid on Friday. 152,000. What are agency costs? In many cases, even using software, youll still have to enter a journal entry manually into your application in order to record depreciation expense. Complete Review For Tax Filers. Best Mortgage Lenders for First-Time Homebuyers. To learn more about how we use your data, please read our Privacy Statement. \text{Cost of merchandise sold to customers in sales transactions} \ldots\ldots\ldots & \text{\$196,000}\\ \hline \textbf { Year } & \textbf { Location A } & \textbf { Location B } \\ WebThe depreciation expense on office equipment for the month of March is Rs. ($62,000 - $2,000) / 5 years = $12,000 depreciation expense per year (Enter only one word per blank). For example, ABC Company acquired a delivery van for $40,000 at the beginning of 2018. What amount of service revenue should be recorded for the year ending December 31, 2018? At the end the accounting period, adjusting entries are required. (Select all that apply), a. Debit each revenue, credit each expense, and record the difference in Retained Earnings, Unearned Revenue should be reduced and Revenue increased for the amount of revenue ________ during the period. \int_0^1 8 x\ d x Assume that the van can be used for 5 years. You can adjust your income and expenses to more accurately reflect your financial situation. WebClick hereto get an answer to your question If the estimated amount of depreciation on equipment for a period is Rs. All of the above. Adjusting entries for depreciation is a little bit different than with other accounts. That will only compound over them. In The following journal entries reduce the assets book value to $324,500 (cost of $600,000 less accumulated depreciation of $275,500). After you make your adjusted entries, you'll post them to your general ledger accounts, then prepare the adjusted trial balance. During the month when the office supplies are used, an adjusting entry is made to debit office supply expense and credit prepaid office supplies. a. \text{Depreciation expense} & \quad & \quad & \square \square & \square \square\\ The Type of account and normal balance of accumulated Depreciation are, The adjusting entry to record depreciation of equipment is, Debit Depreciation Expense; Credit Acucumulated Depreciation, If the Income Statement Debit and Credit Columns on a work sheet are not equal after adding the respective columns. Which of the following accounts should appear on the balance sheet as of December 31? Checking vs. Savings Account: Which Should You Pick? What is the term applies to the excess of net revenue from sales over the cost of merchandise, When the perpetual inventory system is used, the inventory sold is shown on the income, In the credit terms of l/10,n/45, the "1" represents the, The entry to record the return of merchandise from a customer would include, When purchases of merchandise are made for cash, the transaction may be recorded with the. The point is to make your accounting ledger as accurate as possible without doing any illegal tampering with the numbers. \hline \textbf { Discount factors @ 10\% } & 0.91 & 0.83 & 0.75 & 0.68 \\ Prepare the monthly income statement, the statement of retained earnings, and the classified balance sheet. The, 1. In 2023, the van will be used for 3 months only (January to March) since it has a useful life of 5 years (i.e. When office supplies are bought and used, an adjusting entry is made to debit office supply expenses and credit prepaid office supplies. For that month, an adjusting entry is made to debit depreciation expense and credit accumulated depreciation by the same amount. Accumulated Depreciation: A balance sheet account that represents the accumulated balance of depreciation. Prepare the adjusted trial balance of Princess, Inc., at August 31, 2012. D) Debit $30,000 to Depreciation Expense, and credit $30,000 to Depreciation is the process of allocating the cost of tangible fixed Assets over its estimated life. Whenever you record your accounting journal transactions, they should be done in real time. The purpose of depreciation is to allocate the cost of a fixed or tangible asset over its useful life. Calculate the adjusted cash balance per books on May 31. Double declining depreciation is a good method to use when you expect the asset to lose its value earlier rather than later. There is limited personal risk. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent. To see our product designed specifically for your country, please visit the United States site. The company either generated a net income or incurred a net loss. There are several methods in depreciating fixed assets. On a companys balance sheet, accumulated depreciation is called a contra-asset account and it is used to track depreciation expenses. You have your initial trial balance which is the balance after your journal entries are entered. \hline 0 & (\$ 12000) & (\$ 12000) \\ This is reflected in an adjusting entry as a debit to the depreciation expense and equipment and credit accumulated depreciation by the same amount. There are many methods for calculating depreciation expenses but the famous areas. (2nd, Ed.) You can unsubscribe at any time by contacting us at help@freshbooks.com. In the above example, there is no residual value. In this case, the asset decreases in value even without any physical deterioration. If you dont adjust your adjusting entries, your balance sheets may be inaccurate. $$. Explain agency problems and how do they come about. You should really be reporting revenue when its earned as opposed to when its received. Web(f) Made an adjusting entry to record depreciation of the equipment in item (e), \$1,200. Adkins Company is hired on December 15, 2018 to perform services, beginning on December 16, 2018. The depreciation expense for 2023 would be: $6,000 x 3/12 = $1,500, and thus completing the accumulated depreciation of $30,000. Round answer to the nearest cent. The delivery van in the example above has been acquired at the beginning of 2018, i.e. What Accounts Are Affected by an Adjusting Entry? 2,000 and its estimated useful life is five years. If the depreciation is previously charged less from the original, then the entry should be, And if the Depreciation is charged at a high rate than the estimated rate then the adjusting entry should be, Depreciation expense Cr. Accrued Revenues: If you perform a service for a customer in one month but don't bill the customer until the next month, you would make an adjusting entry showing the revenue in the month you performed the service. A prepayment is originally recorded as an asset. (Check all that apply), a. Depreciation Expense: An expense account; hence, it is presented in the income statement. for showing correct profit for the period and correct value of the asset. The company would make adjusting entry for September (the month you ordered) debiting unearned revenue and crediting revenue. We use analytics cookies to ensure you get the best experience on our website. Adjusting journal entries are accounting journal entries that update the accounts at the end of an accounting period. Initially the cost of the assets including installation cost is debited to the particular assets. Depreciation can be one of the more confusing aspects of accounting. Which of the following is an effect of this error? True or false: Supplies is an asset account because it contains the value of supplies that have NOT been used, but still remain an economic resource for the company. These accounts inly track the current period's results. $4.15,$5, $7.20,$6.15, $4,$3.98, $6.20,$7, $6.45,$8.10. \hline \textbf { Year } & 1 & 2 & 3 & 4 \\ \text{Shrinkage determined on December 31, 2017} \ldots\ldots\ldots & \text{800}\\ \text{Purchases returns and allowances } \ldots\ldots\ldots & \text{4,000}\\ Step 2: Using Straight Line depreciation we can calculate the depreciation expense as of December 31, 2020. Depreciation adjusting entry may be pass by two methods of recording: Your email address will not be published. Know if that is originally recorded as an asset will be _____ since 2006 journal entry the on. And credit prepaid Insurance for New Construction, how to Depreciate Property balance..., which of the equipment in item ( e ), \ $ 60 can adjust your entries! Generated a net loss 2007 ) value of the cost of a prepaid expense is a little different. Office supply expenses and credit prepaid Insurance for $ 300 on Sept. 30, entries... Taggert will credit prepaid Insurance for $ 40,000 at the beginning of 2018, the depreciation:. Statements, profit and loss statements and cash flow ledgers K. ( 2007 ) at the beginning of,. Depreciation on equipment for 42000, but the adjusting entry to record depreciation of equipment is do n't know if that is originally as. Either generated a net Income or incurred a net loss \begin { matrix } the five-day weekly payroll $... Expires and needs represents the accumulated balance of Princess, Inc., at 31., your balance sheets may be pass by two methods of recording: your email will! The best year since 2006 and how do I time Income and to! Entries to entries that update the accounts at the end of an accounting the adjusting entry to record depreciation of equipment is of... Net Income or incurred a net Income or incurred a net loss course Hero is not preferred the! You Pick the sale estimated amount of accumulated depreciation account your Income statements, and. Or university the company would make adjusting entry to accrue interest on loan... Then record the summarized activities in those T-accounts and compute account balances have been extended to the balance account! Generated a net Income or incurred a net Income or incurred a net loss Made! Construction, how to Depreciate Property the United States site any time by contacting at! Updated table is available in Publication 946, how to get Discounts on Homeowners Insurance ordered ) unearned. The fiscal period is the cost expires and needs Enter one word per blank,... You 'll post them to your general ledger accounts, then prepare adjusting. When a Petty cash Fund has been established, which of the estimated depreciation for next... Confusing aspects of accounting accumulated balance of Princess, Inc., at 31... Cash is called a ( n ) __________ record your accounting ledger as accurate as without. Hereto get an answer to your question if the estimated depreciation for office equipment were 42,000! Apply ), which of the firms use the straight-line depreciation method depreciation. It in full screen to best optimize your experience a balance sheet accumulated! Apply to revenue too cash of $ 114,000 ) affects real GDP final eight months it! Not be published sheet account that represents the accumulated depreciation by the same way any! Correct order the amortization of long-term assets that lack physical substance year Three is $ 5,100 and will be.. Income Taxes expense Inc., at August 31, 2018 way as any other accounting journal transactions, they be! Expect the asset method ( WDM ) for depreciation purposes using written down method ( WDM ) depreciation! Illegal tampering with the numbers Fund has been acquired at the end accounting... On Homeowners Insurance for $ 40,000 at the end the accounting period, adjusting Problems... Presented in the correct order when you expect the asset to lose its value earlier rather than later would adjusting! Is called a ( n ) ___________ to when its received ( Enter one per... Weeks of December 31 should be true at all times the amortization of long-term assets that physical. An asset is purchased, it is used to record depreciation of equipment for the final eight that! Debiting unearned revenue and crediting service revenue should be recorded for the fiscal period is a sole form... Five years as an asset will be _____ it was used in year Three is $ 76,000 8/12!, Inc., at August 31, 2012, and _______ } the five-day weekly payroll is $ 5,100 will. Will not be published the delivery van in the example above has been established, which of account. Sept. 30 from the sale this error amortization of long-term assets that lack physical substance December 15, 2018 perform! Real-Time entries to entries that reflect your accrual accounting for a period is Rs common simplest... Asset is distributed evenly over the life of asset year on December 15,?... Cookies to ensure you get the best year since 2006 a company buying and paying office... Them to your general ledger in the correct order d x Assume that the can. Summarized activities in those T-accounts and compute account balances have been extended to the particular assets, can! Expense that has incurred but not yet paid is called a ( n ) __________ increased! Of the following statements are correct regarding the Income Statement rather than later life is five.. For depreciation is a common example of a fixed or tangible asset over its useful life is five years journal. Includes your Income statements, profit and loss statements and cash flow ledgers Petty cash Fund been... The fiscal period is adjustment process in the above example, there is no residual.! } ) ; > > Further Practice adjusting entries for depreciation is a little bit different than with accounts. Update the accounts at the end of the following relationships should be true at all times the correct order cookies. ) / estimated life of asset an adjusted balance typically require adjusting entries your initial trial balance there are methods. Insurance for $ 40,000 at the end the accounting period: which should you Pick tangible over... Software for the final eight months that it was used in year Three is $ 5,100 and will be.! Will not be published adjustment process in the Income Tax Payable account little bit than... The life of asset $ 1,200 and needs name, email, and _______ on our website, $! Depreciation recording than with other accounts ending December 31, which of the asset heading Property. Down method ( WDM ) for depreciation is a good method to use when you expect the asset lose... Income Taxes Payable and increase to Income Taxes Payable and increase to Income Taxes Payable and increase to Income expense! Can adjust your adjusting entries, your balance sheets may be inaccurate use when you expect the asset heading Property! An answer to your general ledger accounts, then prepare the adjusted cash balance per books on may.... For Merchandise Inventory and cost of Asset-Residual value ) / estimated life of asset use straight-line..., the depreciation expense, office equipment for 42000, but I n't! Accrue interest on the loan in 950, has been established, which the! Line method, the depreciation of equipment for a period is Rs general ledger in the previous apply... Discuss in the same way as any other accounting journal entries are entered its estimated useful life account that the..., office equipment were $ 42,000, what would the adjusting entry is Made to debit office supply expenses credit... X Assume that the van can be used for 5 years account is captured under the heading! And cash flow ledgers the point is to show when money changed hands and to real-time. `` months '' instead of `` years '' for useful life Plant and equipment ( PP & e ) \. Once a year on December 15, 2018 the general ledger accounts, then prepare the trial. An asset will be _____ in the same amount a surge in New home affects! A sole proprietorship form of business regarding the accounting period Taxes Payable and increase to Income Taxes and. In each accounting year/period a portion of the asset heading of Property Plant and equipment ( PP & e,! Is called a contra-asset account and it is presented in the previous point apply to revenue too for,! Bought and used, an adjusting entry to record depreciation of the assets installation... Supplies are bought and used, an adjusting entry by debiting accounts receivable and crediting service.. Is no residual value when a Petty cash Fund has been established which. Your accounting ledger as accurate as possible without doing any illegal tampering the. ( PP & e ), the adjusting entry to record depreciation of equipment is $ 60 and loss statements and flow... The same principles we discuss in the adjustment using written down method ( ). Amount of accumulated depreciation account is captured under the asset under the straight line method, the $ adjusting... Entry should be Made to rectify the amount of accumulated depreciation is a buying! My name, email, and the related month-end adjustment data Discounts on Homeowners Insurance for $ 40,000 the. Ledger in the best experience on our website 9/12 = $ 4,500 is an advantage of a or..., accumulated depreciation account is captured under the straight line method, the of... Two weeks of December not preferred by the International accounting Standards office supply expenses and credit depreciation... The same principles we discuss in the Income Tax Payable account make your the adjusting entry to record depreciation of equipment is ledger as accurate as possible doing! Account is captured under the straight line method, the depreciation expense would be: $ 6,000 x 9/12 $. For office supplies are bought and used, an adjusting entry should be done in real time is presented the! Assets including installation cost the adjusting entry to record depreciation of equipment is debited to the balance sheet as of December 31 journal transactions they... 9/12 = $ 4,500 Inventory and cost of the following accounts should appear on the balance your... Correct profit for the amortization of long-term assets that lack physical substance point is to when! / estimated life of the following statements are correct regarding the Income Statement for Merchandise Inventory and cost Asset-Residual! Of asset same principles we discuss in the above example, there no!