Hampton Auto purchased a piece of equipment on January 1, 2019 for $100,000. The equipment will be depreciated using straight line depreciation for five years and is expected to have no salvage value. What is the impact on the balance sheet for the recognition of the first year’s depreciation?

• Both assets and shareholder’s equity will increase by $20,000
• Both assets and shareholder’s equity will decrease by $20,000.
• Assets will decrease by $20,000 and shareholder’s equity is unaffected
• Shareholder’s equity will decrease by $20,000 and assets are unaffected.

Answer rating: 100% (QA)

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