At the end of the year the Investment in Bacolod account of the home office is P300,500. However, there are transactions discovered to have errors. •Bacolod branch bought equipment on June 1, 2020 costing P63,800 for the home office's use and the policy is to record the asset in Bacolod's books. During that time the home office recorded the equipment and credited its reciprocal account of its Bacolod branch. •The policy of the company regarding the equipment's depreciation is that it has a life of 8 years with no salvage value and the straight-line method should be used. No entry has been made by the home office and branch. •The home office ships merchandise to Bacolod amounting to P96,700. Bacolod recorded the transaction as P97,600 •Bacolod pays the home office's creditors in the amount of P32,400 and sends a debit memo to the home office. •Upon receipt of the debit memo, the home office debited its reciprocal account in the amount of P23,400 twice. What is the unadjusted balance of the home office current account in the books of Bacolod at the end of the year? * 379,600 252,000 286,000 315,800
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.
At the end of the year the Investment in Bacolod account of the home office is
P300,500. However, there are transactions discovered to have errors.
•Bacolod branch bought equipment on June 1, 2020 costing P63,800 for the
home office's use and the policy is to record the asset in Bacolod's books.
During that time the home office recorded the equipment and credited its
reciprocal account of its Bacolod branch.
•The policy of the company regarding the equipment's
has a life of 8 years with no salvage value and the straight-line method should
be used. No entry has been made by the home office and branch.
•The home office ships merchandise to Bacolod amounting to P96,700. Bacolod
recorded the transaction as P97,600
•Bacolod pays the home office's creditors in the amount of P32,400 and sends a
debit memo to the home office.
•Upon receipt of the debit memo, the home office debited its reciprocal
account in the amount of P23,400 twice.
What is the unadjusted balance of the home office current account in the books
of Bacolod at the end of the year? *
379,600
252,000
286,000
315,800
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