During your examination of the 20x3 financial statements of Goyo Company, the following data were discovered. Give any correcting and adjusting entries called for by the information given. Disregard any effects on income tax. 1. An office equipment purchased on January 2, 20x2, at the cost of P44,000, having an estimated salvage value of P4,000 and an estimated useful life of five (5) years, is now estimated to have a total life of 10 years from January 2, 20x2. The estimated salvage value remains unchanged, the straight-line method of depreciation is used. 2. Interest deducted in advance on notes payable amounts to P10,000. The Interest Expense account has a debit balance of P15,000. The company failed to record interest deducted in advance at the end of 20x1, P6,000; and at
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.
During your examination of the 20x3 financial statements of Goyo Company, the following data were discovered. Give any correcting and
1. An office equipment purchased on January 2, 20x2, at the cost of P44,000, having an estimated salvage value of P4,000 and an estimated useful life of five (5) years, is now estimated to have a total life of 10 years from January 2, 20x2. The estimated salvage value remains unchanged, the straight-line method of
2. Interest deducted in advance on notes payable amounts to P10,000. The Interest Expense account has a debit balance of P15,000. The company failed to record interest deducted in advance at the end of 20x1, P6,000; and at the end of 20x2, P6,200. All original entries were made to the Interest Expense account.
3. Merchandise in transit, December 31, 20x3, FOB shipping point, of P30,000 was not included in the inventory as of December 31, 20x3, but was entered in the Purchases account in 20x3.
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