When DeSoto Water Works purchased a machine at the end of 2015 at a cost of $65,000, the company debited Buildings and credited Cash $65,000. The error was discovered in 2016. What journal entry will DeSoto use to correct the error? What other step(s) would be taken in connection with the error?
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.
When DeSoto Water Works purchased a machine at the end of 2015 at a cost of $65,000, the company debited Buildings and credited Cash $65,000. The error was discovered in 2016. What
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
