If a fixed asset, such as a computer, were purchased on January 1 for $3,750 with an estimated life of 3 years and a salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is: 1.200 1,200 $100 $100 a. Depreciation Expense 100 Accumulated Depreciation 100b. Depreciation Expense 1200 Accumulated Depreciation 1200 c. Accumulated Depreciation 100 Depreciation Expense 100d. Accumulated Depreciation 1200 Depreciation Expense 1200

The answer is A.

Dr Depreciation expense $100

Cr Accumulated depreciation $100

Explanation:

The formula for depreciation using the straight-line method is:

(Cost of the asset - residual/salvage value) ÷ useful life of the asset.

Cost of the asset is $3,750

Salvage (residual) value is $150

Useful life is 3 years

So we have:

($3,750 - $150) ÷ 3years

=$3,600 ÷ 3

=$1,200

$1,200 is the depreciation expene for a year.

Therefore, monthly depreciation expense will be:

$1,200/100

=$100

According to the accounting rule, debit increases asset and expenses and vice-versa while credit decreases liability, equity, income and vice versa.

Dr Depreciation expense $100

Cr Accumulated depreciation $100

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