How would I record this on the "Journal Entry" and at what amount?
Information for Year-End Adjusting Journal Entries
December 31,2006
1. $71,400 of office equipment was purchased on Jan. 1, 2004. The office equipment is expected to have a useful life of 7 years with no salvage value. Depreciation expense has been recorded through Nov. 30, 2006. No depreciation expense for the month of December should be recorded for the equipment purchased on December 31, 2006.
To record the Year-End Adjusting Journal Entry for the office equipment, you will need to calculate the depreciation expense for the month of December 2006 and record it accordingly.
Here's how you can approach it:
1. Determine the monthly depreciation expense: To calculate the monthly depreciation expense, divide the initial cost of the office equipment by the expected useful life in months. In this case, the cost of the equipment is $71,400, and the expected useful life is 7 years, which is equivalent to 84 months.
Monthly depreciation expense = Cost of equipment / Useful life in months
Monthly depreciation expense = $71,400 / 84 months
Monthly depreciation expense ≈ $850
2. Adjusting Journal Entry: Now, to record the depreciation expense for the month of December 2006, you will need to debit the Depreciation Expense account and credit the Accumulated Depreciation account.
Debit: Depreciation Expense
Credit: Accumulated Depreciation
The amount should be the monthly depreciation expense calculated earlier, which is $850.
Journal Entry:
Date: December 31, 2006
Debit: Depreciation Expense - $850
Credit: Accumulated Depreciation - $850
By recording this journal entry, you are recognizing the depreciation expense for the month of December 2006 and updating the accumulated depreciation of the office equipment.