The following additional information is available December 31, 2021: 1. Store Supplies on hand on December 31, 2021, amounted to $800,000. 2. Insurance of $2,660,000 was paid on January 1, 2021, for the 14-months to February 28, 2022 3. Prepaid rent expired December 31, 2021, amounted to $2,100,000 4. The furniture and equipment have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $200,000. 5. The delivery van cost relates to two Toyoda Vans purchased for $2,000,000 each by the company on January 1, 2015. The double-declining balance method of depreciation is used to compute the van’s depreciation charges and their expected useful life is 10 years or 100,000 miles. In 2015, 10,000 miles were driven, 16,500 in 2016, 12,600 in 2017, 16,000 in 2018, 16,500 in 2019, 14,800 in 2020 and 16,800 in 2021. The residual value on both van is $241,592 each. On September 1, 2021, the company sold one of the vans to ZM Company for $680,000 on credit. Round off answers to the nearest dollar. 6. Salaries earned by employees and not yet paid amounted to $120,000 on Dec 31, 2021. 7. Accrued interest expense as of December 31, 2021, $145,000. 8. On Dec 31, 2021, $1,350,000 of the previously unearned sales revenue had been earned 9. The aging of the Accounts Receivable schedule on Dec 31, 2021, indicated that the Allowance for Bad Debts should be $500,000 10. A physical count of inventory was done on December 31, 2021, after making all the other adjustments and this revealed that there was $4,700,000 worth of inventory on hand at this point. Other data: 11. The business is expected to make principal payments totalling $780,000 towards the loan during the fiscal year to November 31,2022. Required: Prepare the necessary adjusting journal entries on Dec 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 December 31, 2021:
1. Store Supplies on hand on December 31, 2021, amounted to $800,000.
2. Insurance of $2,660,000 was paid on January 1, 2021, for the 14-months to February 28, 2022
3. Prepaid rent expired December 31, 2021, amounted to $2,100,000
4. The furniture and equipment have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $200,000.
5. The delivery van cost relates to two Toyoda Vans purchased for $2,000,000 each by the company on January 1, 2015. The double-declining balance method of
6. Salaries earned by employees and not yet paid amounted to $120,000 on Dec 31, 2021.
7. Accrued interest expense as of December 31, 2021, $145,000.
8. On Dec 31, 2021, $1,350,000 of the previously unearned sales revenue had been earned
9. The aging of the
10. A physical count of inventory was done on December 31, 2021, after making all the other adjustments and this revealed that there was $4,700,000 worth of inventory on hand at this point.
Other data:
11. The business is expected to make principal payments totalling $780,000 towards the loan during the fiscal year to November 31,2022.
Required:
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