Tesla Inc. managers buy seven semiconductor manufacturing devices at $170,000 per equipment for which the manager expect to use them over 7 years and have 10,000 dollar value per equipment at the end of the usage. What is the journal entry at the end of the seventh year to record a depreciation expense under the straight-line method?

• A. Dr. Accumulated depreciation 170 ,000; Cr. Depreciation expense 170,000
• B. Dr. Accumulated depreciation 1,190,000; Cr. Depreciation expense 1,190,000
• C. Dr. Depreciation expense 160,000; Cr. Accumulated depreciation 160,000
• D. Dr. Depreciation expense 170,000; Cr. Accumulated depreciation 170,000
• E. None of the choices is correct.
• F. Dr. Accumulated depreciation 1,120,000; Cr. Depreciation expense 1,120,000
• G. Dr. Depreciation expense 1,120,000; Cr. Accumulated depreciation 1,120,000
• H. Dr. Depreciation expense 1,190,000; Cr. Accumulated depreciation 1,190,000
• I. Dr. Accumulated depreciation 160,000; Cr. Depreciation expense 160,000

Unearned revenue is a liability account as it represents cash received in advance of providing products or services. Hence, before adjusting entry, liability is overstated and revenue is understated. In contrast, prepaid expenses are an asset account as it indicates cash paid for in advance of receiving their benefits. Hence, before an adjusting entry, expense is understated and asset is overstated.

A. True

B. False