Question

Mike installed new fencing around the perimeter of the property. The installation was completed on 6/28/2017 at a cost of $80,000.  Mike estimates the useful life of the fencing to be 20 years. Mike uses straight-line depreciation. What is the adjusting entry?

Answer 1

While Accounting for Land Improvements(Items that add Functionality to the Land), items that have a Depreciable Life are accounted separately from Land A/c. They are depreciated over their useful life whereas Land is non Depreciable Asset.

Adjusting Entries would be:

Accounts Dr Cr

Land Improvement A/c(Fencing) Dr $80000

To Cash A/c $80000

(Being Fencing Cost incurred)

Also there would be Depreciation each year, whose entry would be

Depreciation A/c Dr $4000

To Land Improvements A/c(Fencing) $4000

(or Accumulated Depreciation A/c)

(being depreciation expenses booked)