A repair of an equipment amounting to P30,000 on December 31, 2021 that will prolong of the equipment for three more years was charged to repairs expense. The revised remaining life of the equipment is now 6 years. Required: adjusting entries
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.
A repair of an equipment amounting to P30,000 on December 31, 2021 that will prolong of the equipment for three more years was charged to repairs expense. The revised remaining life of the equipment is now 6 years.
Required:
![You have been engaged to audit FAR EASTERN COMPANY, a new client, for the year ended,
December 31, 2021. The company prepared the trial balance set forth below, as of December 31,2021,the
close of its second year of operations.
Account Titles
Unadjusted Trial Balance
Debit
Credit
Cash
112,600.00
Marketable Securities
72,000.00
Allowance for decline in value of securities
Accounts Receivable - Trade
1,758,220.00
Allowance for doubtful accounts
40,000.00
Accounts Receivable - Others
Advances to affiliate
48,000.00
250,000.00
Inventory, December 31, 2021
Property, Plant and Equipment
Accumulated Depreciation
2,770,000.00
Accounts Payable
Income Tax Payable
Long-term Debt
Ordinary Share Capital
Retained Earnings
Revaluation Increment
Sales
Cost of Sales
2,269,604.00
170,622.00
Operating Expenses
Other Charges
100,000.00
Provision for Income Taxes (35%)
80,954.00
Discontinued Operations (Net)
6,500.00
Cumulative Effect of Change in Accounting Principle (Net)
13,000.00
7,691,500.00
20,000.00
68,100.00
1,240,000.00
408,616.00
71,260.00
60,000.00
2,042,000.00
770,000.00
240,000.00
2,771,524.00
7,691,500.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1dd2a25c-0ba6-469a-9db5-f2ee2d9ca18d%2Ff81adf50-de7a-4503-b4ec-1a1bbfaa4a6d%2Fdymuwdg_processed.png&w=3840&q=75)
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