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Insurance and Depreciation Overview

The document details the accounting entries for insurance expenses and prepaid insurance from January 1, 2018, through January 31, 2021, including adjusting entries. It also outlines the calculation of depreciation expenses using both the Units of Production (UOP) and Double Declining Balance (DDB) methods over several years. The total depreciation expense calculated using both methods is $210,000.

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5 views2 pages

Insurance and Depreciation Overview

The document details the accounting entries for insurance expenses and prepaid insurance from January 1, 2018, through January 31, 2021, including adjusting entries. It also outlines the calculation of depreciation expenses using both the Units of Production (UOP) and Double Declining Balance (DDB) methods over several years. The total depreciation expense calculated using both methods is $210,000.

Uploaded by

malakmikas7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Date Account Debit Credit

insurance expense 7,200


January 1, 2018
Cash 7,200

insurance expense
Date Details Debit Credit Debit Credit
January 1, 2018 To Cash 7,200 7,200

Cash
Date Details Debit Credit Debit Credit
January 1, 2018 By Insurance Expense 7,200 7,200

Insurance Exp per year = 7200/4 = 1800

Adjusting entry
Date Account Debit Credit
prepaid insurance 5,400
January 31, 2018
insurance expense 5,400

insurance expense
Date Details Debit Credit Debit Credit
January 1, 2018 To Cash 7,200 7,200
January 31, 2018 By Prepaid insurance 5400 1,800

Prepaid Insurance
Date Details Debit Credit Debit Credit
January 31, 2018 To Insurance Exp. 5,400 5,400
January 31, 2019 By Insurance Exp. 1,800 3,600
January 31, 2020 By Insurance Exp. 1,800 1,800
January 31, 2021 By Insurance Exp. 1,800 0

Year 2019
Date Account Debit Credit
insurance expense 1,800
January 1, 2019
Prepaid Ins 1,800

insurance expense
Date Details Debit Credit Debit Credit
January 1, 2019 To Prepaid Ins 1,800 1,800

Year 2020
Date Account Debit Credit
insurance expense 1,800
January 1, 2020
Prepaid Ins 1,800

insurance expense
Date Details Debit Credit Debit Credit
January 1, 2020 To Prepaid Ins 1,800 1,800

Year 2021
Date Account Debit Credit
insurance expense 1,800
January 1, 2021
Prepaid Ins 1,800
insurance expense
Date Details Debit Credit Debit Credit
January 1, 2021 To Prepaid Ins 1,800 1,800

Problem #2

Depreciable value =250000 - 40000 =210000

depreciation according to UOP


depreciation rate per unit = 210000÷500000 =
0.42

Year Number of meals Depreciation rate per meal Depreciation expense


2014 57,000 0.42 $23,940
2015 69,000 0.42 $28,980
2016 77,000 0.42 $32,340
2017 88,000 0.42 $36,960
2018 96,000 0.42 $40,320
2019 113,000 0.42 $47,460
Total 500,000 0.42 $210,000

depreciation according to DDB


Depreciation rate = 100% ÷6 = 16.67%
Double rate = 16.67x2 = 33.34%

Year Beginning Balance Depreciation Rate Depreciation Expense Ending Balance


2014 $210,000 33.34% $70,014 $139,986
2015 $139,986 33.34% $46,671 $93,315
2016 $93,315 33.34% $31,111 $62,204
2017 $62,204 33.34% $20,739 $41,465
2018 $41,465 50% $20,732 $20,732
2019 $20,732 100% $20,732 $0
Total $0 $210,000

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