On May 2 Buzz Newsstand purchased a new machine for $2,700. It has an estimated disposal value
Question:
On May 2 Buzz Newsstand purchased a new machine for $2,700. It has an estimated disposal value of $100 and an estimated useful life of eight years. Buzz uses the straight-line method.
On December 31 the adjustment for depreciation for the first year was entered: Accumulated Depreciation—Store Equipment was credited for $325, and Depreciation Expense—Store Equipment was debited for $325.
Instructions
Answer the following questions regarding this adjustment:
1. What is wrong with the adjustment for depreciation made on December 31? What is the correct entry?
2. One year from now, another adjustment for this machine will be entered on the work sheet. Assume the error from the previous year is not corrected. What amount should be entered in the Adjustments section for annual depreciation expense?
Step by Step Answer:
1 What is wrong is that the depreciable basis of the machine cost less estimated salvage value was n...View the full answer
