Accounting for Depreciation and Disposal

Recording Depreciation

• Depreciation expense is debited, increasing the expense on the income statement
• Accumulated depreciation is credited, increasing the contra asset account reflecting the reduction in the asset's value

Recording Gain on Disposal

• Cash is debited for the proceeds from the sale
• Accumulated depreciation is debited to remove the accumulated depreciation associated with the asset
• The original cost of the asset is credited, reducing the asset's balance
• A gain on disposal is credited, reflecting the difference between the proceeds and the book value of the asset

Recording Loss on Disposal

• Cash is debited for the proceeds from the sale
• A loss on asset disposal is debited, reflecting the difference between the proceeds and the book value of the asset
• Accumulated depreciation is debited to remove the accumulated depreciation associated with the asset
• The original cost of the asset is credited, reducing the asset's balance

Recording Sales on Account

• Accounts receivable is debited, reflecting the amount owed by the customer
• Revenue is credited, recording the sale made

Setting Up an Allowance for Doubtful Accounts (AFDA)

• Bad debt expense is debited, reflecting the estimated amount of uncollectible accounts
• Allowance for doubtful accounts is credited, creating a contra asset account to reduce accounts receivable

Decreasing AFDA

• Allowance for doubtful accounts is debited, reducing the contra asset account
• Bad debt expense is credited, reducing the expense on the income statement

Writing Off Uncollectible Accounts

• Allowance for doubtful accounts is debited, reducing the contra asset account
• Accounts receivable is credited, reflecting the removal of the uncollectible account

Payment Made Early By Customer

• Cash is debited, reflecting the receipt of payment
• Unearned revenue is credited, reflecting the liability owed to the customer for goods or services not yet delivered

Service Performed After Customer Paid Early

• Unearned revenue is debited, reducing the liability owed to the customer
• Revenue is credited, reflecting the service performed

Recording Bankrupt Account

• Bad debt expense is debited, reflecting the uncollectible amount

• Allowance for doubtful accounts is credited, increasing the contra asset account

• Allowance for doubtful accounts is debited, reducing the contra asset account

• Accounts receivable is credited, reflecting the removal of the uncollectible account

Recording Principal Payment of Long-Term Loan

• Long-term loan is debited, reducing the outstanding loan balance
• Cash is credited, reflecting the payment made

Recording Interest Payments of Long-Term Loan

• Interest expense is debited, reflecting the interest incurred
• Cash is credited, reflecting the payment made

Recording Salaries

• Salaries payable is debited, reflecting the liability owed to employees for unpaid salaries
• Cash is credited, reflecting the payment made

Recognizing Accrued Salaries

• Salaries expense is debited, reflecting the salaries earned by employees
• Salaries payable is credited, increasing the liability owed to employees for unpaid salaries

This quiz covers key concepts in accounting related to recording depreciation, gains, and losses on asset disposals. It outlines the proper journal entries for each scenario, helping you understand how these transactions impact financial statements. Test your knowledge on how to accurately reflect these events in your accounting practices.