Question

For each separate case below, follow the three-step process for adjusting the Accumulated Depreciation account at December 31.

Step 1: Determine what the current account balance equals.
Step 2: Determine what the current account balance should equal.
Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Assume no other adjusting entries are made during the year.

a. The Krug Company's Accumulated Depreciation account has a $14,500 balance to start the year. A review of depreciation schedules reveals that $15,800 of depreciation expense must be recorded for the year. Debit or Credit? 14,500 Debit Accumulated depreciation 14,500 Step 1: Determine what the current account balance equals. $ Step 2: Determine what the current account balance should equal. ait Da Credit Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Adjusting Entry Debit Insurance expense Equipment 223 11

I just wrote numbers not correct by the way just to show the formating.

Answer 1

Adjustments for depreciation is made at the year end.Adjustments is 3 step process

1) determine current account balance

2) determine what the current account balance should equal

3) record adjusting entry to derive at step 2 from step 1 balance.

a)

Step 1:

Current account balance = $14,500 Accumulated depreciation credit

Step 2:

Current account balance should equal $30,300 Accumulated depreciation credit

($14,500+current year depreciation $ 15,800)

Step 3 :

		Debit	Credit
	Depreciation expense	$15,800
	Accumulated depreciation		$15,800

B)As the truck is purchased at the start of the year there will be zero balance in accumulated depreciation as truck is the only asset.

Step 1:

Current account balance = $0 Accumulated depreciation credit

Step 2:

Find depreciation expense

=(Cost-salvage) / years

=($46,000-0)/5

=$9,200

Current account balance should equal $9,200 credit Accumulated depreciation

Step 3:

Journal Entry

Depreciation expense-Truck	$9,200
Accumulated depreciation-Truck		$9,200

C)

As the equipment is purchased at the start of the year there will be zero balance in accumulated depreciation as truck is the only asset.

Step 1:

Current account balance = $0 Accumulated depreciation credit

Step 2:

Find depreciation expense

Cost-salvage/years

=$36,000-$5,200/7

=$4,400

Current account balance should equal $4,400 credit Accumulated depreciation

Step 3:

Depreciation Expense-equipment	$4,400
Accumulated depreciation-equipment		$4,400