purchased on January 1, 20X1, for $45,000 and has an estimated useful life of 8 years with a salvage value of 3,720. Depreciation is computed using the straight-line method. Signed a 5-month contract for $6,210 of prepaid advertising on January 1, 20X1. Prepaid rent for the year on January 1, 20X1, in the amount of 26,950.
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.
Read the description of the following adjustments that are required at the end of the accounting period for Paulo Consulting Services. Record the necessary
- Equipment was purchased on January 1, 20X1, for $45,000 and has an estimated useful life of 8 years with a salvage value of 3,720.
Depreciation is computed using the straight-line method. - Signed a 5-month contract for $6,210 of prepaid advertising on January 1, 20X1.
- Prepaid rent for the year on January 1, 20X1, in the amount of 26,950.
- Purchased supplies for $7,000 on January 1, 20X1. Inventory of supplies was $5,650 on January 31, 20X1.
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