110 Cash 100,000 120 Accounts receivables 500,000 130 Merchandise inventory 700,000 140 Prepaid rent 300,000 150 Shop equipment
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The unadjusted
|
Dores Marie Pateno Hobby Shop |
|||||
|
Unadjusted Trial Balance |
|||||
|
December 31, 2020 |
|||||
|
110 |
Cash |
100,000 |
|||
|
120 |
|
500,000 |
|
||
|
130 |
Merchandise inventory |
700,000 |
|
||
|
140 |
Prepaid rent |
300,000 |
|
||
|
150 |
Shop equipment |
1,600,000 |
|
||
|
155 |
|
|
200,000 |
||
|
210 |
Accounts payable |
|
400,000 |
||
|
220 |
Pateno, capital |
|
1,300,000 |
||
|
230 |
Pateno, withdrawals |
100,000 |
|
||
|
240 |
Sales |
|
2,900,000 |
||
|
310 |
Sales discount |
100,000 |
|
||
|
320 |
Purchases |
800,000 |
|
||
|
410 |
Purchases returns and allowances |
|
200,000 |
||
|
510 |
Transportation in |
100,000 |
|
||
|
520 |
Salaries expense |
400,000 |
|
||
|
530 |
Advertising expense |
150,000 |
|
||
|
540 |
Utilities expense |
100,000 |
|
||
|
550 |
Supplies expense |
50,000 |
|
||
|
Totals |
5,000,000 |
5,000,000 |
Additional information:
- Accrued salaries at year-end amounted to P30,000.
- Rent in the amount of P100,000 has expired during the year.
- Depreciation on shop equipment is P200,000.
- The Dec. 31 merchandise inventory amounted to P500,000.
Required:
- Prepare the
adjusting entries . - Prepare the Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Financial Position.
- Prepare closing entries and the post-closing trial balance.
- Prepare reversing entries for January 1, 2021.
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