On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow. DATE TRANSACTIONS July 1 Purchased office equipment for $17,000 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of six years and a $1,160 salvage value. The equipment will be depreciated using the straight-line method. 1 Purchased a one-year insurance policy and issued Check 102 for $1,620 to pay the entire premium. Record the adjusting journal entries that must be made on July 31, 2019. 1) Record the adjustment for depreciation on the equipment. 2) Record the adjustment for insurance expired. Date General Journal Debit Credit Jul 31, 2019
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.
On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow.
| DATE | TRANSACTIONS | |
| July | 1 |
Purchased office equipment for $17,000 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of six years and a $1,160 salvage value. The equipment will be
|
| 1 |
Purchased a one-year insurance policy and issued Check 102 for $1,620 to pay the entire premium.
|
Record the
1) Record the adjustment for depreciation on the equipment.
2) Record the adjustment for insurance expired.
|
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