Accumulated Depreciation is a contra-account which appears on the asset side of the Balance Sheet. Accumulated depreciation is the cumulative total of depreciation expense taken each year from the beginning of time against assets that are still owned. Income statement Balance sheet Retained earnings statement Statement of cash flows Comments: Question 10. Question : When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected? Short enough to be read in a day. Question : Cash receipts from interest and dividends are classified as investing activities operating activities either financing or investing activities financing activities Comments: Question 12. Depreciation Expense: Expense; Accumulated Depreciation: Contra Asset b. The truck is estimated to last for five years, at which point it will be completely worn out and sent to the scrap yard.
Which type s of adjustments are the financial statements affected by? When a fixed asset is purchased it is not expensed all at once. Question : On the balance sheet, Accrued expenses are ordinarily reported as: Fixed assets Prepaid expenses Assets Liabilities Comments: Question 7. For the airplane in question, it works out to 0. When a company buys an asset they have to spread the cost of the asset over it's useful economic lifetime, this is done with depreciation. Failing to adjust an Unearned Revenue that has been partially earned and was originally recorded as a credit to Unearned Revenue will usually result in an: a. Typical depreciation methods can include straight line, double-declining balance, and units of production.
Instead, they can more easily be associated with an entire system of production or group of assets. Since higher depreciation expense is charged in initial years, it is called method. It allows a larger deduction in early years and lower deductions in later years when compared to the straight-line method. Points Received: 0 of 2 Comments: Question 9. Example continued : Eventually, after 5 years, Accumulated Depreciation will have a credit balance of 5,000 the original cost of the asset. He holds a master's degree in economics from Queen's University and studied radio broadcasting at Humber College. The journal entry is: Dr.
Debit: Depreciation Expense; Credit: Accumulated Depreciation c. A liability is decreased when cash is collected in advance c. Accumulated depreciation is all of the depreciation ever 'accumulated' against the assets currently in service. The net amount of these two accounts is the book value of fixed assets. Deferrals Accruals Both deferrals and accruals Neither deferrals nor accruals Comments: Question 3. Debit: Rent Expense; Credit: Unearned Rent c. Debit: Prepaid Rent; Credit: Cash b.
Prepaid Rent is credited d. This is because a company has a net cash outflow in the entire amount of the asset when the asset was originally purchased, so there is no further cash-related activity. Depreciation Expense: Asset Deferral; Accumulated Depreciation: Contra Asset c. Question : The accounting equation is the basis for analyzing, summarizing, and recording transactions in accounting. Advance payments for services are called: a. A liability is increased when revenue is recognized d.
Question : Which transaction would be recorded in a cash basis system of accounting? Both types of depreciation should be listed on year-end and quarterly reports, but it is depreciation that is the more common of the two due to its application regarding deductions and can help lower a company's tax liability. A liability is increased when cash is collected in advance b. Question : Which of the following is an example of a deferred expense? Question : When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected? Question : What are the four timing differences between recognizing revenues and expenses between accrual basis and cash basis accounting? The units of production method might be very relevant to depreciation of the fuselage and cabin of the plane. Depreciation expense and accumulated depreciation are related, but they are not the same thing. Straight-line depreciation can also be calculated using. Since the property does not fall into mid-month or mid-quarter convention, the half-year convention is relevant.
Note B: Due to half-year convention, depreciation charged for half-year in 2014. There are other things to take into consideration so take with your accountant. Some of these methods are sum of years digits, declining balance and straight line. . Question : Which transaction would be recorded in a cash basis system of accounting? Popular depreciation methods include straight-line method, declining balance method, units of production method, sum of year digits method.
Karl debited Prepaid Rent to record the payment. When the accumulated depreciation equals the asset purchase price, the book value is zero and the asset can no longer be depreciated. The accounting for requires an ongoing series of entries to charge a to , and eventually to it. Income statement Balance sheet Retained earnings statement Statement of cash flows Comments: Question 10. Question : Using accrual accounting, expenses are recorded and reported only When they are incurred and paid at the same time When they are incurred, whether or not cash is paid If they are paid before they are incurred If they are paid after they are incurred Comments: Question 14. It is important to note that the for tax purposes there are alternative methods to calculating depreciation, and that you should consider all available options for your assets before committing to one methodology.
The benefit of the additional accounting accuracy is far outweighed by the hassle involved in making insignificant depreciation journal entries year after year. Question : Cash receipts from interest and dividends are classified as investing activities operating activities either financing or investing activities financing activities Comments: Question 12. Unearned revenue Accounts payable Prepaid advertising Accounts receivable Comments: Question 13. Accumulated depreciation is the accumulation of previous years' depreciation expenses. Debit: Accumulated Depreciation; Credit: Depreciation Expense d. When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected? Depreciation expense reflects how much of an asset is used up in a given year, while accumulated depreciation is a measure of the total wear on the asset while it has been owned by the business. Given this information, Rent Revenue for the current year must be: a.