CT Has Been Using the "Expense as Incurred" Approach in Recording

question 146

Essay

CT has been using the "expense as incurred" approach in recording ordinary repairs. For 2013, CT decided to use the allocation approach on an annual basis. Estimated expenditures for ordinary repairs for the year 2013 were $6,000. Actual cash expenditures for ordinary repairs for January 2013 were $550. Give the indicated journal entries for January 2013.

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Definitions:

Income Effect

The change in consumers' purchasing power and consequently the quantity demanded of a good or service, prompted by a change in real income.

Opportunity Cost

Missing the chance to profit from several alternative options by deciding on one.

Hourly Wage Rate

The amount of money paid for each hour of work, commonly used to compensate employees in many occupations.

Marginal Utility

The augmented enjoyment or usefulness that comes from the consumption of an additional unit of a product or service.