By Admin on Jan 24, 2010 in Corporations
L asked:
Please help me figure this out, I’m totally confused.
Vehicles purchased Jan 1, 2007 cost – $62,000 amortized for 4 years
Trial balance for Dec. 31, 2008 has Accrued amortization – vehicles at $15,500. Is this not the correct answer and does not require an adjustment? I’m afraid I am missing something.
Please help me figure this out, I’m totally confused.
Vehicles purchased Jan 1, 2007 cost – $62,000 amortized for 4 years
Trial balance for Dec. 31, 2008 has Accrued amortization – vehicles at $15,500. Is this not the correct answer and does not require an adjustment? I’m afraid I am missing something.
if amortizing over 4 years then after 2 years half of the vehicle cost should be amortized. $31,000 should be in accrued amortization at Dec 31, 2008, which is halfway thru the 4 year life.
David Z | Jan 26, 2010 | Reply
Vehicles cost – $62,000
If amortization is over 4 yrs, each yr’s amortization is $15,500. By Dec 31, 2008, there shd be 2 yrs’ accumulated amortization in the acccounts, i.e. $31,000, but your trial balance shows only $15,500. That means you have amortized the vehicles only for the 1st yr. You haven’t amortized them for 2008. You do require an adjustment:
Dr Amortization – vehicles $15,500
Cr Accumulated amortization – vehicles $15,500
Sandy | Jan 27, 2010 | Reply