The following additional information is available at December 31, 2018: Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019. The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $100,000. The computer equipment was acquired on March 1, 2018 and is being depreciated over 10 years on the double-declining method of depreciation, down to a residue of $60,000. Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018. A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand. At December 31, $140,000 of the previously unearned sales revenue had been earned. The aging of the Accounts Receivable schedule at December 31 indicated that the estimated uncollectible on account receivable should be $45,000. REQUIRED: Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018.
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.
The following additional information is available at December 31, 2018:
- Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019.
- The furniture and fixtures have an estimated useful life of 10 years and is being
depreciated on the straight-line method down to a residual value of $100,000. - The computer equipment was acquired on March 1, 2018 and is being depreciated over 10 years on the double-declining method of depreciation, down to a residue of $60,000.
- Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018.
- A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand.
- At December 31, $140,000 of the previously unearned sales revenue had been earned.
- The aging of the
Accounts Receivable schedule at December 31 indicated that the estimated uncollectible on account receivable should be $45,000.
REQUIRED:
- Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018.
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