Paris Company's trial balance of profit or loss accounts for the year ended December 31, 2021 included the following: DEBIT CREDIT Sales P2,500,000 Cost of Sales P1,600,000 Administrative Expenses 150,000 Loss on Sale of Equipment 90,000 Salesmen's Commission 100,000 Interest Revenue 50,000 Freight-out 30,000 Loss on Condemnation of Asset 100,000 Bad Debts Expense 30,000 P2,100,000 P2,550,000 Other Information: Finished goods inventory, Jan, 1 - P1,000,000; Finished Goods Inventory, Dec. 31 - P900,000 What was Paris Company's profit before tax?
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.
Paris Company's
|
|
DEBIT |
CREDIT |
|
Sales |
|
P2,500,000 |
|
Cost of Sales |
P1,600,000 |
|
|
Administrative Expenses |
150,000 |
|
|
Loss on Sale of Equipment |
90,000 |
|
|
Salesmen's Commission |
100,000 |
|
|
Interest Revenue |
|
50,000 |
|
Freight-out |
30,000 |
|
|
Loss on Condemnation of Asset |
100,000 |
|
|
|
30,000 |
|
|
|
P2,100,000 |
P2,550,000 |
Other Information:
Finished goods inventory, Jan, 1 - P1,000,000; Finished Goods Inventory, Dec. 31 - P900,000
What was Paris Company's profit before tax?
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