Prepare the necessary adjusting entries for the following independent transactions: 1. BIA purchased factory equipment by making a P200,000 cash down payment and signing a 3-year P300,000 10% note payable. The acquisition was recorded as follows: Factory Equipment 530,000 Cash 200,000 Note Payable 300,000 Interest Payable 30,000 2. TIO CO. purchased store equipment for P800,000, 2/10, n/30. TIO took the discount and made the following entry when it paid for the acquisition: Store Equipment 800,000 Cash 784,000 Purchase Discount 16,000
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.
Prepare the necessary
1. BIA purchased factory equipment by making a P200,000 cash down payment and signing a 3-year P300,000 10% note payable. The acquisition was recorded as follows:
Factory Equipment 530,000
Cash 200,000
Note Payable 300,000
Interest Payable 30,000
2. TIO CO. purchased store equipment for P800,000, 2/10, n/30. TIO took the discount and made the following entry when it paid for the acquisition:
Store Equipment 800,000
Cash 784,000
Purchase Discount 16,000
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