COMMERCE 2FA3 Lecture Notes - Lecture 1: Income Statement
Document Summary
Cash can never be an account of an adjusting entry. An adjusting entry will always include an item from the balance sheet and an item from the income statement: on march 1, 2012, xyz co. purchased an insurance policy for one year effective immediately. The premium of ,400 is paid in advance. 2012 is the first year of operation for xyz. In march 1, 2013 xyz renewed the insurance policy. The new premium of ,000 is paid in advance. Cash 2400 (ca-) (adjust) decemeber 31st, 2012 i. Insurance expense 2000 (2400/10 months) leftover insurance (e+) 3000/12x10=2500+400=2900: on april 1, 2013 abc purchased equipment that cost ,000. The expected useful life is 4 years and the estimated salvage value at the end of its life is ,000. The accounting period ends dec. 31 each year. Accumulated depreciation- equipment 11,250 (annual depreciation expense = (cost salvage value) / useful life. Depreciation expense for 2013 = (80,000-20,000)/4 x 9/12 = ,250)