Cheryl Fereday Began an Engineering Design Company and During the Month

question 15

Essay

Cheryl Fereday began an engineering design company and during the month of October completed these transactions:(a) Began business by investing cash, $11,000, and computer equipment with a fair value of $3,000.(b) Paid rent for one year in advance, $3,000.(c) Completed a beam design and billed the client for $3,000.(d) Paid the utilities bill for the month, $100.(e) Wrote a $1,000 cheque on the business bank account for personal expenses. Prepare journal entries to record the above transactions. Include a brief description for each entry.

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Definitions:

Straight-line Method

A depreciation method that allocates an equal amount of depreciation each year over the useful life of an asset.

Depreciable Assets

Assets whose cost is allocated over their useful lives due to usage, wear and tear, or obsolescence.

Annual Depreciation

The portion of an asset's cost that is allocated as an expense each year over its useful life through the process of depreciation.

Salvage Values

Salvage Values represent the estimated residual value of an asset after its useful life has ended and it has been fully depreciated.