A depreciation schedule for semi-trucks of JIN Manufacturing Company was requested by your auditor soon after December 31, 2021, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2018-2021, inclusive. The following data were ascertained: Truck No. 1 Truck No. 2 Truck No. 3 Purchased January 1, 2015, cost Purchased July 1, 2015, cost Purchased January 1, 2017, cost Purchased July 1, 2017, cost P 180,000 220,000 300,000 240,000 P 940,000 Truck No. 4 Balance, Jan1, 2018 The Accumulated Depreciation – Trucks account previously adjusted to January 1, 2018, and entered in the ledger, had a balance on that date of P302,000 (depreciation on the four trucks from the respective dates of purchase, based on a 5-year life, no salvage value). No charges had been made against the account before January 1, 2018. Transactions between January 1, 2018 and December 31, 2021, which were recorded in the ledger, are as follows: Truck No. 3 was traded for a larger one, Truck No. 5, the agreed purchase price of which was P400,000. JIN paid the automobile dealer P220,000 cash on the transaction. The entry was a debit to Trucks and a credit to Cash, P220,000. The transaction has commercial substance. July 1, 2018 Truck No. 1 was sold for P35,000 cash, entry debited Cash and credited Trucks, P35,000. January 1, 2019 July 1, 2020 A new truck, Truck No. 6, was acquired for #420,000 cash and was charged at that amount to the Trucks account. Assume Truck No. 2 was not retired. July 1, 2020 Truck No. 4 was damaged in a wreck to such an extent that it was sold as junk for #7,000 cash. JIN received P25,000 from the insurance company. The entry made by the bookkeeper was a debit to Cash, P32,000, and credits to Miscellaneous income, P7,000, and Trucks, P25,000 Entries for depreciation had been made at the close of each year as follows: 210,000 225,000 P 250,500 304,000 2018 2020 2019 2021
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
What is the net book value of the Trucks on December 31, 2021?
The TOTAL
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