The following information pertains to Nour Company: 1- Equipment was purchased on September 1, 2014 for $210,000. It is estimated salvage value is $30,000 and it is estimated useful life is 5 years. After the 5 years the equipment was sold for $30,000. 2- Building was purchased on January 1, 2018 for $300,000. It is useful life is 20 years and depreciated on a reducing balance rate of 10%. 3- On March 31,2019 ABC, Inc. paid Nour Publishing Company $15,840 for a 3-year subscription for five different magazines. The subscriptions started immediately. The payment was recorded by Nour company to the Revenue account. 4- On December 31, 2019 the balance of Receivables was $165,000 and the balance of Allowance of irrecoverable receivables was $21,000. Before adjusting the accounts, Nour finds that receivables of $15,000 need to be written off as irrecoverable, and the allowance for receivables is to be set at ten percent of the remaining outstanding receivables as at 31 December 2019. Required: 1- Prepare the necessary adjusting entries at December 31, 2019. Show your calculations. 2- Prepare a partial income statement and a partial balance sheet for the year ended December 31,2019 to show the effect of the adjusting entries on these statements (Show you computations and explanation)
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.
The following information pertains to Nour Company:
1- Equipment was purchased on September 1, 2014 for $210,000. It is estimated salvage value is $30,000 and it is estimated useful life is 5 years. After the 5 years the equipment was sold for $30,000.
2- Building was purchased on January 1, 2018 for $300,000. It is useful life is 20 years and
3- On March 31,2019 ABC, Inc. paid Nour Publishing Company $15,840 for a 3-year subscription for five different magazines. The subscriptions started immediately. The payment was recorded by Nour company to the Revenue account.
4- On December 31, 2019 the balance of Receivables was $165,000 and the balance of Allowance of irrecoverable receivables was $21,000. Before adjusting the accounts, Nour finds that receivables of $15,000 need to be written off as irrecoverable, and the allowance for receivables is to be set at ten percent of the remaining outstanding receivables as at 31 December 2019.
Required:
1- Prepare the necessary
2- Prepare a partial income statement and a partial balance sheet for the year ended December 31,2019 to show the effect of the adjusting entries on these statements (Show you computations and explanation)
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