What was the correct balance of accounts payable at December 31, 2021? Choices: P950,000 P1,050,000 P1,297,000 P1,362,000
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.
Orange Corp.’s accounts payable at December 31, 2021, totaled P800,000 before any necessary year-end adjustments relating to the following transactions:
· On December 27, 2021, Orange wrote and recorded checks to creditors totaling P350,000 causing an overdraft of P100,000 in Orange’s bank account at December 31, 2021. The checks were mailed out on January 10, 2022.
· On December 28, 2021, Orange purchased and received goods for P150,000, terms 2/10, n/30. Orange records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2022.
· Goods purchased on December 20, 2021, shipped f.o.b. destination, were received January 2, 2022. The invoice cost was P65,000. Terms 2/10, 2/30
What was the correct balance of accounts payable at December 31, 2021?
Choices:
Step by step
Solved in 2 steps with 2 images
