18.6.1. Journal Entries

Try these first

1. 1.

   What is the first step when making a journal entry for depreciation?

   Hint

   Think about how expenses are recorded.

2. 2.

   What does crediting the Asset Account signify?

   Hint

   Consider the asset's depreciation over its useful life.

3. 3.

   What is the first journal entry made when accounting for depreciation?

   • Debit Asset Account
   • Debit Depreciation Account
   • Credit Provision for Depreciation

   Hint

   Think about which account represents the expense incurred.

4. 4.

   True or False: Provision for Depreciation is an optional entry.

   • True
   • False

   Hint

   Consider long-term asset management needs.

5. 5.

   A corporation has a delivery truck that cost $50,000 with a residual value of$5,000 and a useful life of 10 years. Calculate the annual straight-line depreciation and illustrate the journal entry for the first year.

   Hint

   Use the straight-line method formula to determine the depreciation expense.

6. 6.

   Discuss how the choice between directly charging depreciation versus using a provision could impact cash flow management for a company.

   Hint

   Consider how each method relates to future asset replacements.