Question

At the end of its first year, the trial balance of Crane Company shows Equipment $34,000 and zero balances in Accumulated Depreciation-Equipment and Depreciation Expense, Depreciation for the year is estimated to be $3,700. 

Prepare the adjusting entry for depreciation at December 31. 

 Post the adjustments to T-accounts.

Answer 1

Question 3.

Adjustment entry for depreciation for December ,31

		Debit	Credit
Dec 31	Depreciation Expense	$3700
	Accumulated Depreciation		$3700
	( Being depreciation provided for the year)

Adjustment to T account

	Depreciation Expense
12/31	$3700	.......	.......

	Accumulated Depreciation
..........	.......	12/31	$3700

Explanation ,

As given in the Question that there is no balance in the depreciation as well as Accumulated depreciation account , we have to book depreciation expenses for the year

1) When company purchase any Assets , instead of expensing it as there is future benefit involve with this assets Asset is capitalise in Book of Account and , there expesnes are allocation over the life of Asset by way of Depreciation

2)Depreciation expenses are the allocation of cost of assets over the life of assets , and are reported in income statement as expense.

3) In finanacial statement or balancesheet , Asset are shown at the book value ie Purchase value , and Accumulated depreciation are deducted from it , to show actual depreciated value of Assets . Refer below for example

	Crane Company Balancesheet ( Partial )
Equipement	$34000
Less Accumulated Depreciation	$(3700)	$30300

4) When depreciation expense is book for the year it get accumulated to the Accumulated depreciation account

5) At the end of year Temporary account will closes by passing closing entry , ie Account which charges to Income Statement and hence depreciation will again have 0 balance , and accumulated depreciation will have credit balance of $3700 which will be shown in Balancesheet.