The following additional information is available at July 31, 2021: (i) Rent of $510,000 was paid on April 1, 2021, for six (6) -months to September 2021. (ii) The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is depreciated on the double-declining depreciation method down to a residual value of $100,000. (iii) The company has two deliver trucks and uses the units of production method to compute the depreciation charges. One of the trucks was purchased for $800,000 on August 1, 2018, and is recognized as truck A. The other which is recognized as truck B was purchased for $1,100,000 on October 1, 2020. The expected useful life of both truck is ten (10) years or 120,000 miles. And the residual value on both trucks is $200,000. In the 2018/2019 financial year truck A drove 12,000 miles, 18,000 miles in 2019/2020, and 21,000 miles in 2020/2021. Truck B drove 8,000 miles in 2020/2021. (iv) Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021. (v) A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand. (iv) At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned. (vii) The aging of the Accounts Receivable schedule at July 31, 2021 indicated that the estimated uncollectible on account receivable should be $29,050. REQUIRED: A. Prepare the necessary adjusting journal entries on July 31, 2021. [Narrations are not required]
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 July 31, 2021:
(i) Rent of $510,000 was paid on April 1, 2021, for six (6) -months to September 2021.
(ii) The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is
(iii) The company has two deliver trucks and uses the
(iv) Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021.
(v) A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand.
(iv) At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned.
(vii) The aging of the
REQUIRED:
A. Prepare the necessary
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B. Prepare Movies To Maximum Auto Supplies Ltd multiple-step income statement for the year ended July 31, 2021
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