Look here! Please help me with these two accounting questions?

Question

Alright, I have 2 questions:

1) Equipment debit: 49,800

Accumulated depreciation credit 4,980

And now I need help with adjusting the entry for "Depreciation for the year on the equipment 5,000"

2) Next - I need help calculating EPS. Net income = 26,510

65.000 shares and sold 3.000 additional shares of capital stock for cash at USD 1 market value per share.

So how do I calculate the EPS?

I really appreciate your help

Answer 1

I can only help you with Part 1.  Hopefully someone else can help with Part 2.  I want to make sure you actually understand how to show depreciation, so I'm not just going to give you the answer.

The "Equipment" is an asset account.  Each time you buy new equipment, this account is debited.  The account by which you paid for your new equipment is credited.

EXAMPLE: Purchased Lawmower: Equipment DR $5000, Accounts Payable CR $5000

The taxman sets a standard rate for which classes of assets will depreciate.  For example, a computer will depreciate much faster than a building.  Therefore, each class has a percentage of depreciation that can be "written off" as an expense of doing business.  To keep track of how much something has depreciated, a contra account is made for each account that has depreciable property.  For example, you have an Equipment Account, and an Accumulated Depreciation Equipment account (sometimes called accumulated ammortization).  You will also have an expense account called "Equipment depreciation".

When doing this adjusting entry, you will 'expense' $5000.  The entry will look like this:

(Asset) Accumulated Depreciation Equipment CR $5000

(Expense) Equipment Depreciation DR $5000.

In you example, it looks like you wrote off $4980 for depreciation in the previous year.  Now you have written off $9980 total.  If you were to sell this piece of equipment, the value should now be $39820 (what you paid for it, minus the depreciation).  If you sell it for more or less than that amount, there are some other adjusting entries that happen -- but that's for another time.

Hope that made sense!