Question

On January 1, 2022, Salt Creek Country Club purchased a new riding mower for $15,000. The mower is expected to have a 10-year life with a $1,000 salvage value. Prepare a tabular summary to record depreciation expense on December 31, 2022, if Salt Creek uses straight-line depreciation. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)

Answer 1

Firstly, we need to calculate the depreciation expenses for the year before we will prepare the entry for the expense.

• The formula for Depreciation expenses is [(Cost - Salvage value) / Useful life}.

Depreciation Expense = [($15,000 - $1,000) / 10 years]

Depreciation Expense = $14,000 / 10 years

Depreciation Expense = $1,400 per year

• Below is the Journal entry to record the depreciation expenses.

Date                  Account titles                                         Debit       Credit

Dec 31, 2022    Depreciation Expenses-Equipment     $1,400

                             Accumulated Depreciation-Equipment            $1,470

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