Answered: (1) What type of account is accumulated…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter18: Accounting For Long-term Assets

Section: Chapter Questions

Problem 1MYW

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Question

Claudia is learning about depreciation and she is getting a little frustrated with the idea of accumulated depreciation. "Why can’t you just debit depreciation expense and credit equipment?" She complains. "It would be so much easier that way!"

(1) What type of account is accumulated depreciation and why does it get used in the depreciation of fixed assets instead of doing it Claudia's way?

(2) Does accumulated depreciation have a debit balance or a credit balance?

Part II

Benny, an inexperienced accountant at Ace Plus, is about to post the monthly depreciation entries for the company's fixed assets. The depreciation amounts have already been calculated on a spreadsheet by the owner, who is not very knowledgeable in accounting. Benny's instructions are to post the following depreciation amounts for the month:

Building - $1,100

Land - 500

Equipment - 800

What will Benny's journal entries look like if they are done correctly? Can each item "share" an accumulated depreciation account or should each type of asset have its own?

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