On January 1, 2018, the company purchased equipment that cost $10,000. The equipment is expected to be worth about (or has a salvage value of) $1,000 at the end of its useful life in five years. The company uses straight-line depreciation. It has not recorded any adjustments relating to this equipment during 2018. Complete the necessary journal entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

The adjustment entry:

Debit Depreciation Expense $1,800

Credit Accumulated depreciation account $1,800

Explanation:

The company uses straight-line depreciation method. Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of equipment − Salvage Value )/Useful Life  = ($10,000 - $1,000)/5 = $1,800

The company purchased equipment on January 1, 2018. Depreciation Expense of the equipment for 2018 was $1,800

The adjustment entry:

Debit Depreciation Expense $1,800

Credit Accumulated depreciation account $1,800

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