Multiple Choice
The journal entry to record depreciation on factory equipment is to:
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3. Accrual Accounting Concepts
Adjusting Entries: Depreciation
Multiple Choice
In adjusting entries for depreciation, accumulated depreciation and depreciation expense are classified, respectively, as:
A
Asset account and liability account
B
Expense account and contra-asset account
C
Contra-asset account and expense account
D
Liability account and revenue account
Verified step by step guidance1
Step 1: Understand the nature of depreciation expense. Depreciation expense represents the allocation of the cost of a tangible asset over its useful life and is recorded as an expense on the income statement.
Step 2: Recognize the classification of accumulated depreciation. Accumulated depreciation is a contra-asset account, meaning it is linked to an asset account but has a credit balance that reduces the asset's book value on the balance sheet.
Step 3: Recall that expenses increase with debits and accumulated depreciation increases with credits. Therefore, depreciation expense is an expense account (debit balance), and accumulated depreciation is a contra-asset account (credit balance).
Step 4: Review the options given: Asset account and liability account; Expense account and contra-asset account; Contra-asset account and expense account; Liability account and revenue account.
Step 5: Conclude that the correct classification is 'Accumulated depreciation' as a contra-asset account and 'Depreciation expense' as an expense account, matching the option 'Contra-asset account and expense account'.
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