Quote:
Originally Posted by Unregistered
Hi all, I was asked this question during a technical accounting interview.
A company received a $50,000 invoice for upgrading works on a PPE. The company made a 40% down payment on the invoice. No upgrading work has started yet. What are the correct journal entries?
Option 1:
Dr Prepayment 20,000
Cr Cash 20,000
Option 2:
Dr PPE 50,000
Cr Cash 20,000
Cr Accounts Payable 30,000
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All wrong but opt1 is close. No work started no obligation, no liabilities.
Why no answer??? U ask?? Because should be deposit or advance! Not prepayment.. ask the firm go study whats the diff.