Question 19:

A company purchases equipment for $40,000 cash with a useful life of 5 years and no salvage value.

Requirements:

1. Calculate the annual depreciation expense using the straight-line method.

2. Record the journal entry to recognize the purchase of equipment.

3. Post the journal entry to the Equipment account in the ledger.

4. Analyze how this transaction affects the company's balance sheet.

5. Discuss the impact of depreciation on the company's profitability over the asset's useful life.