Accumulated Depreciation is: A contra asset on the balance sheet A liability on
ID: 2561351 • Letter: A
Question
Accumulated Depreciation is:
A contra asset on the balance sheet
A liability on the balance sheet
An expense on the income statement
None of the other answers are correct.
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. Wilson estimates that the equipment will have a useful life of 8,000 hours after which it will have a $2,000 salvage value. During the first year, the machine was used for 2,500 hours. Using units of production depreciation, which of the following is correct regarding recording (journalizing) depreciation?
Debit Machine Expense
Credit Accumulated Depreciation
Debit Depreciation Expense
Credit Machine
Debit Depreciation Expense
Credit Accumulated Depreciation
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. It will be used for 5 years, after which its residual value will be about $2,000. What is the depreciable basis of the equipment assuming the company uses straight-line depreciation?
$32,000
$30,000
$24,000
$29,500
What is the normal balance of accumulated depreciation?
Debit
Credit
It is a temporary account and has no normal balance.
It depends on how much the asset has been depreciated.
How is the book value (carrying value) of an asset computed?
Depreciable basis - Accumulated Depreciation
Original Cost - Accumulated Depreciation
Original Cost - Depreciation Expense
Depreciable basis - Depreciation Expense
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. Wilson estimates that the equipment will have a useful life of 8,000 hours after which it will have a $2,000 salvage value. During the first year, the machine was used for 2,500 hours. Using units of production depreciation, what is the depreciation expense per machine hour?
$3.75 per Machine Hour
$4.00 per Machine Hour
#3.50 per Machine Hour
A contra asset on the balance sheet
A liability on the balance sheet
An expense on the income statement
None of the other answers are correct.
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. Wilson estimates that the equipment will have a useful life of 8,000 hours after which it will have a $2,000 salvage value. During the first year, the machine was used for 2,500 hours. Using units of production depreciation, which of the following is correct regarding recording (journalizing) depreciation?
Debit Machine Expense
Credit Accumulated Depreciation
Debit Depreciation Expense
Credit Machine
Debit Depreciation Expense
Credit Accumulated Depreciation
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. It will be used for 5 years, after which its residual value will be about $2,000. What is the depreciable basis of the equipment assuming the company uses straight-line depreciation?
$32,000
$30,000
$24,000
$29,500
What is the normal balance of accumulated depreciation?
Debit
Credit
It is a temporary account and has no normal balance.
It depends on how much the asset has been depreciated.
How is the book value (carrying value) of an asset computed?
Depreciable basis - Accumulated Depreciation
Original Cost - Accumulated Depreciation
Original Cost - Depreciation Expense
Depreciable basis - Depreciation Expense
Wilson Company purchased equipment to be used in its factory. The equipment cost $32,000. Wilson estimates that the equipment will have a useful life of 8,000 hours after which it will have a $2,000 salvage value. During the first year, the machine was used for 2,500 hours. Using units of production depreciation, what is the depreciation expense per machine hour?
$3.75 per Machine Hour
$4.00 per Machine Hour
#3.50 per Machine Hour
Explanation / Answer
1. Accumulated depreciation is a contra asset, since that is related to asset and has a credit balance. Contra asset account shows credit balance and offsets a related asset account.
First option is correct.
2. Journal entry for recording depreciation is:
Last option is correct.
3. Depreciable basis = Original cost - Salvage value
= $32000 - $2000 = $30000
Second option is correct.
4. The accumulated depreciation is contra asset account and thus have a credit balance.
Second option is correct.
5. Book value is computed by deducting the accumulated depreciation balance from the original cost of the asset.
Second option is correct.
6. Depreciation expense per hour = (Original cost - Salvage value) / Useful life in hours
= ($32000 - $2000) / 8000
= $3.75
First option is correct.
Account Name Debit Credit Depreciation expense xx Accumulated Depreciation xx