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11 February, 04:52

Holman company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method, and only prepares adjustments at year-end. the adjusting entry needed to record annual depreciation is:

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  1. 11 February, 05:13
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    Depreciation is a way not only to recognize the lost value over time of an asset, but also a way to recognize the expense of the asset over time. To this end, we want to see the value of the asset get smaller, and a piece of the asset on the the income statement ever period.

    The depreciation base is 95,000 - 5,000 = 90,000, and the depreciation period is 90,000/15,000 = 6 years.

    The journal entry every year will be

    Dec. 31

    Debit: Depreciation expense 15,0000

    Credit: Accumulated Depreciation (15,000)

    Accumulated depreciation is a * contra-asset * account on the balance sheet that reduces the value of the the depreciable asset.
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