Financial Act Demonstration Problem #3

Financial Act Demonstration Problem#3

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Unformatted text preview: The entry to record depreciation is always the same! Debit to Depreciation Expense and Credit to Accumulated Depreciation. Dr. Feb 28 Depreciation Expense 125 27 Cr. Accumulated Depreciation-off eq. 125 Dr. Cr. Feb 28 Depreciation Expense 250 Accumulated Dep. Lease Imp 250 D. Analysis: When borrowing long-term, you must pay interest. To calculate simple interest, the formula is: Principal x Rate x Time. In this example, Cainas Company has borrowed $3,000 and has not made any payments to reduce the balance (the first payment is due 3/31). But, because Cainas Company has had use of the funds since January, it should record the interest expense the company has incurred to use the borrowed funds. Principal x Rate x Time = $ 3,000 x 8% x 2/12. Remember: 8% is an annual (yearly rate). We are calculating 2 months worth of interest. Since we have not paid the interest yet, we have also incurred a liability. Debit to Interest Expense and Credit to Interest Payable. Feb 28 Interest Expense Interest Payable Dr. 40 Cr. 40 E. Analys...
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This note was uploaded on 01/22/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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