Please prepare the Adjusting entries for the following transactions (US GAAP BASED) 3. Leonard’s Corp purchased a delivery van on July 1, 2005 for P1,250,000 plus prepaid insurance for one year amounting to P5,000. The van has an estimated useful life of 10 years and a zero residual value. Give the entry to record the purchase of the van. Give entry adjustment for depreciation on Dec 31, 2005. What was the book value of the delivery van in 2005 balance sheet?
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.
Please prepare the
3. Leonard’s Corp purchased a delivery van on July 1, 2005 for P1,250,000 plus prepaid insurance for one year amounting to P5,000. The van has an estimated useful life of 10 years and a zero residual value.
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- Give the entry to record the purchase of the van.
- Give entry adjustment for
depreciation on Dec 31, 2005. - What was the book value of the delivery van in 2005
balance sheet ? - Give the entry to record payment for prepaid insurance.
- Give the entry to adjust for the expired insurance on Dec 31, 2005
Using the following information in exercise 3, make the depreciation entry for Dec 31, 2006. Post to T-Accounts the balance of delivery van (starting with 2005 balance), the
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- What was the depreciation expense in the 2006 Income statement?
- What was the book value of the delivery van in the 2006 balance sheet?
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