Answer to Question #287667 in Accounting for johny

Question

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1. Key Insurance Agency was organized on October 1, 2020. Assume that the accounts are closed and financial statements prepared each month. The company occupies rented office space but owns office equipment estimated to have a useful life of 10 years from date of acquisition, October 1. The trial balance for Key Insurance Agency at December 31 is shown below.

Cash $22,565

Accounts Receivables 7.050

Office Equipment 9,600

Accumulated Depreciation: Office Equipment 160

Accounts Payable 2,260

Income Taxes Payable 4,965

Capital Stock 20,000

Retained Earnings 7,450

Dividends 2,500

Commissions Earned 31,080

Advertising Expense 2,400

Salaries Expense 18,000

Rent Expense 3,800

Totals $65,915 $65,915

a. Prepare the adjusting entry to record depreciation of the office equipment for the month of December, using the straight line method of computing depreciation expense.

Answer 1

Depreciation is not reflected in liabilities, but reduces the cost of fixed assets.

Debit main production credit depreciation - depreciation charge - 160

balance will be as follows