Question

Required: 1. What are the classifications of long-lived assets? Explain their differences. 2. Record the purchase on January 2 and the subsequent payment on January 12. Show computations. 3. Indicate the accounts, amounts, and effects (+ for increase and for decrease) of the purchase and subsequent cash payment on the accounting equation. Use the following structure: Date Assets Liabilities + Stockholders' Equity 4. Explain the basis you used for any questionable items.

Answer 1

1. A long lived asset is an asset which is retained by the organisation/business for at least one year. They are retained atleast for one accounting year. They are further classified under

- Tangible long lived Assets

- Intangible long lived Assets

2.) Machine A/C Dr. 88,400

To cash 2400

To equity shares 2000

To note payable 60,000

To vendor. 24,000

(being machin purchased. 02 january)

12 January

Vendor A/c Dr. 24,000

To cash 24,000

(being cash paid)

3)

02 Jan Machinery + cash = Note payable +Vendor+ equity shares

88400 - 2400 = 60000 + 24000 + 2000

12 Jan cash = vendor

- 24000 . = - 24000

4)

I adopted double entry accounting system under which each transaction is recorded in at least two accounts.