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Adjusting Entries: Depreciation quiz #2 Flashcards

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Adjusting Entries: Depreciation quiz #2
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  • What is the normal balance of accumulated depreciation?
    The normal balance of accumulated depreciation is a credit.
  • How is accumulated depreciation classified in financial accounting?
    Accumulated depreciation is classified as a contra asset account.
  • Under which category does depreciation expense fall?
    Depreciation expense falls under the category of expenses.
  • What is the classification of accumulated depreciation?
    Accumulated depreciation is classified as a contra asset account.
  • What type of account is accumulated depreciation?
    Accumulated depreciation is a contra asset account.
  • How is accumulated depreciation reported in the financial statements?
    Accumulated depreciation is reported on the balance sheet as a deduction from the related asset's cost to arrive at net book value.
  • How is depreciation expense reported in the financial statements?
    Depreciation expense is reported on the income statement as an expense for the period.
  • What is the journal entry to record annual depreciation for a machine purchased for $50,000 with a 10-year useful life?
    The journal entry is a debit to depreciation expense for $5,000 and a credit to accumulated depreciation for $5,000. This entry is made at the end of each year to allocate the cost over the asset's useful life.
  • How does accumulated depreciation affect the net book value of a long-term asset over time?
    Accumulated depreciation increases each year as more depreciation expense is recorded. This reduces the net book value of the asset, which is calculated as the original cost minus accumulated depreciation.
  • What happens to the depreciation expense and accumulated depreciation accounts at the start of a new year?
    Depreciation expense resets each year as it is an income statement account. Accumulated depreciation, a balance sheet account, continues to increase as it accumulates the total depreciation taken to date.