Prepare the journal entry assuming the payment is made within 10 days (within the discount period).
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.
Rahe Corp. sold a customer service contract with a price of $20,000 to Peterson Warehousing. Rahe Corp. offered terms of 2/10, n/30 and expects Peterson to pay within the discount period.
Required:
Prepare the
Prepare the journal entry assuming the payment is made within 10 days (within the discount period).
Journal Entry using Net Method:
Peterson Warehousing A/c-----Dr 19600
To Sales A/c 19600
(being credit sales made to Peterson warehousing)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
