1. What are adjusting entries and why are they necessary?
2. What are closing entries and why are they necessary?
3. Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department.
|
Cost of mower and accessories |
$4,000 |
Date purchased |
7/1/2012 |
|
Estimated useful life |
5 yrs |
Monthly salary of groundskeeper |
$1,100 |
|
Salvage value |
$0 |
Estimated annual fuel cost |
$150 |
Compute the amount of depreciation expense (related to the mower and accessories) that should be reported on Boston’s December 31, 2012, income statement. Assume straight line depreciation.