Please explain Gates Publishing Company purchased equipment at the beginning of
ID: 2455095 • Letter: P
Question
Please explain
Gates Publishing Company purchased equipment at the beginning of the year for $400,000. The company decided to depreciate the equipment using the straight-line method. Which of the following is one effect of recognizing depreciation expense during the year? Total expenses and the book value of the depreciated equipment increase Accumulated Depreciation increases and the Equipment account decreases Shareholders' equity and the Equipment account decrease Accumulated Depreciation increases and shareholders' equity decreasesExplanation / Answer
Answer is D Accumulated depreciation increase and Shareholder equity decrease .
Explanation
Depreciation Expense A/c DR xxxx
Accumulated depreciation A/c CR xxxx
ie depreciation expense will reduce the earnings thereby shareholder equity decrease
As Accumulated depreciation account has a credit balance crediting of depreciation expense will increase the accumulated depreciation