the firm bought equipment costing $57,600. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation. Prepare end-of-June adjusting entries for Keller Company. - Prepare the adjusting entry for prepaid rent.
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.
Exercise 5.1 (Algo) Calculating adjustments. LO 5-2
- On June 1, 20X1, Keller Company, a new firm, paid $5,280 rent in advance for a six-month period. The $5,280 was debited to the Prepaid Rent account.
- On June 1, 20X1, the firm bought supplies for $7,350. The $7,350 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing $3,000 were on hand.
- On June 1, 20X1, the firm bought equipment costing $57,600. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of
depreciation.
Prepare end-of-June
- Prepare the adjusting entry for prepaid rent.
- Prepare the adjusting entry for supplies.
- Prepare the adjusting entry for depreciation.
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