Question

A client has a contracting business that designs, manufactures and installs domestic kitchens. They have machinery in place to assist with the production of the kitchens and the machinery is being depreciated over time.

The business is required to report financial information to the lender quarterly. The annual depreciation equates to $24,000 each year.

In order for quarterly figures to show consistency, which 2 methods would work? (Select all that apply)

A.) Create a scheduled journal entry of $24,000, to be entered on an annual basis

B.) Create a scheduled journal entry, choosing every quarter from the interval options. $6,000 per quarter

C.) Create a scheduled journal entry to record on a monthly interval. $2,000 per month

D.) Create a scheduled journal entry, selecting Every 3 months from the interval options. $6,000 on each journal entry

E.) Create a scheduled journal entry, selecting Monthly from the interval options, and then every 3 months. $6,000 on each journal entry

Answer 1

To have a consistency in the quarterly figures, the two methods of recording depreciation are:

B.) Create a scheduled journal entry, choosing every quarter from the interval options. $6,000 per quarter (BECAUSE REPORTING IS QUARTER BASIS AND DEPRECIATION SCHEDULE IS ALSO ON QUARTER BASIS)

C.) Create a scheduled journal entry to record on a monthly interval. $2,000 per month. (BECAUSE IF DEPRECIATION SCHEDULE IS MAINTAINED ON MONTHLY BASIS, THEN ACCUMULATION OF THREE MONTHS OF THE QUARTER WILL COME IN THE REPORTING)