We do need an adjusting entry to recognize the depreciation for six months.
The format of the depreciation journal entry always look like this.
We debit depreciation expense to create the expense, and
then we credit a Accumulated Depreciation.
Remember a Accumulated Depreciation is a contra asset account,
that's where we're going to store up the.
The depreciation over time.
We're not going to directly deduct it from the building account, but instead we're
going to put it in this contra asset called accumulated depreciation.
Because it's a contra asset a credit increases the account,
increases the contra asset which in turn is reducing total assets.
Now we did $10,000 as the number.
Where did we get that from?
From, I've got that one on the slide.
So the building originally cost $500,000 and the salvage value was $100,000,
so we're using up $400,000 of value over time.
We're doing it over 20 years, so that's $20,000 of depreciation per year.
But it's only been six months, so we need to take the $20,000 divided by two,
to get $10,000 of expense for the six months.