Jackie Bergez works for Sea Biscuit Co. She and Bob Welch, her manager, are prep
ID: 2375353 • Letter: J
Question
Jackie Bergez works for Sea Biscuit Co. She and Bob Welch, her manager, are preparing adjusting entries for annual financial statements. Bergez computes depreciation and records it as
Welch agrees with her computation but says the credit entry should be directly to the Equipment account. Welch argues that while accumulated depreciation is technically correct, it is less hassle not to use a contra account and just credit the Equipment account directly. And besides, the balance sheet shows the same amount for total assets under either method.
Required
How should depreciation be recorded? Do you support Bergez or Welch?
Evaluate the strengths and weaknesses of Welch s reasons for preferring his method.
Indicate whether the situation Bergez faces is an ethical problem. Explain.
donnot copy from others please =)
Explanation / Answer
1)depriciation should be recorded under the asset contra account, the accumulated depriciation this is correct. I support Jackie bergez.
2)strengths of welch's reasons is that the total assets amount will be correct and also if depriciation is onlyof equipment, nothing else. Weaknessess are if depriciation is to be observed for a certain period, it will not be possible and if equipment purchased is to be known, it will give net value of equipment not the purchased.
3)This is not ethical problem as the values are not manipulated, final total results are same, only the way of mentioning is different.
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