Equipment with a Residual Value of $50,000 at the End

question 77

Multiple Choice

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000.Assuming the use of the straight-line depreciation method,the journal entry to record depreciation expense for 2012 will have a debit to

• A)Depreciation Expense and a credit to Accumulated Depreciation for $50,000.
• B)Accumulated Depreciation and a credit to Equipment for $50,000.
• C)Depreciation Expense and a credit to Equipment for $45,000.
• D)Depreciation Expense and a credit to Accumulated Depreciation for $45,000.

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Definitions:

Average Accounting Rate of Return

A financial ratio that measures the expected return on an investment based on its net income and initial cost.

Straight-Line Depreciation

An arrangement for allocating the cost of a tangible asset over its duration of usefulness in identical annual segments.

Discount Rate

The interest rate charged to commercial banks and other depository institutions by the central bank for loans received from the central bank's discount window; it is also used in discounted cash flow analysis to determine the present value of future cash flows.

Payback Period

The duration required for an investment to recoup its initial outlay in terms of profits or savings.