On January 1, 2020, Taco Taqueria, a Mexican restaurant, purchased equipment for $12,000 cash. Taco Taqueria estimates

Question:

On January 1, 2020, Taco Taqueria, a Mexican restaurant, purchased equipment for $12,000 cash. Taco Taqueria estimates that the equipment will last five years (useful life). The restaurant expects to sell the equipment for $2,000 at the end of five years. Taco Taqueria prepares financial statements on an annual basis and has a December 31 year-end.

a. Record the journal entry on January 1, 2020.

b. What is the formula to calculate straight-line depreciation?

c. Using the straight-line depreciation method, calculate the annual depreciation for 2020 (Jan. 1 to Dec. 31, 2020).

d. In order to prepare the annual financial statements, record the adjusting journal entry for depreciation on December 31, 2020.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...

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