Under the straight line method the annual

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Under the straight-line method, the annual depreciation expense I computed asfollows:Depreciation expense/year =Cost – Residual ValueEstimated useful life (in years)If the asset is used for less than a year, the proportionate expense should becalculated, unless the company adopts a different policy such as providing half-year depreciation in the year of acquisition of the asset.The account “Accumulated Depreciation” is a contra asset account; it is reportedin the statement of financial position as a deduction from the related property,plant and equipment account.Other cost allocation includes amortization of intangible assets like franchise andpatents. This topic is being discussed in higher accounting subjects.Example 6 -PQR Company acquired an office equipment on October 1, 2013for P310,000. The asset has an estimated useful life of 5 years and an estimatedresidual value pf P10,000. The entries to record the expense of 2013 and 2014are presented on the next page .11
2013Dec 31Depreciation Expense15,000Accumulated Depreciation15,000(P310,000 – P10,000)/5 yrs. X 3/12Depreciation expense for 2013 is for three months; that is, October 1 to December 31, 20132014Dec 31Depreciation Expense60,000Accumulated Depreciation60,000Depreciation expense for 2014 is for one year or twelve (12) months.f.Uncollectible accounts– these represent customer’s accounts that may no longer collected orthat may possibly become bad debts. PAS No.39 provides that trade accounts receivable shouldbereportedin the statement of financial position atamortized cost. Amortized cost is defined asthe amount at which the receivable is measured at the time it was first recognized minus anypayments and minus any reduction (directly or through the use of an allowance account) foruncollectibility. The entry to record estimated uncollectible accounts is as follows:Uncollectible Accounts ExpensexxxAllowance for Uncollectible AccountsxxxPAS No. 39 requires a careful assessment of the collectability of the receivables (classified asfinancial assets).Several considerations have to be taken account, which will be discussedthoroughly in higher accounting subject.For purposes of discussion in this book, theestimated uncollectible amount will be provided.The amount of uncollectible accounts expense that will be reported in the income statement iscomputed as follows:Required allowance balancePxxx12
Allowance balance before adjustment(+ debit balance/ - credit balance)xxxUncollectible accounts expense for the periodPxxxThe amount “Allowance for Uncollectible Accounts” is a contra asset account; it is reported onthe statement of financial position as a deduction from Accounts Receivable.Example 7: STU Company’s trial balance dated December 31,2014, contains the followinginformation:Accounts receivableP350,000 debitAllowance for uncollectible accounts2,000 creditSales1, 850,000 creditEstimated uncollectible accounts amounted to P6,050.

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Term
Fall
Professor
MamPinky
Tags
Balance Sheet, Generally Accepted Accounting Principles, Uncollectible Accounts, Income Summary

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