Review Journal Entries for Addition Transactions

Scenario

Acme Company is growing fast and needs a more powerful server to handle its applications. It's estimated that this new server will satisfy the company demands for the following four years. However, this server has very strict requirements in terms of temperature and humidity to work properly. As a result, Acme decided to build a new room to meet those conditions. Acme Company purchases the new server computer and assigns it to the Information Technology department. The server will eventually be physically located in the new room that the company is building. It's currently in the old server room where those conditions are barely met.

Current Period Addition Transaction Details

The new server computer was purchased and placed in service in year 1, quarter 1. The asset is added into Oracle Assets in the period it was acquired. The recoverable cost is 4,000 and the depreciation method is straight-line. The asset life is four years.

The asset cost increases by 4,000. Debit 4,000 to the Asset Cost account and credit 4,000 to the Asset Clearing account. The contra account is the clearing account that balances with the payables clearing account. The calculated depreciation for the period is 250. Debit the depreciation expense account and credit the Accumulated Depreciation (reserve) account for that amount.

The calculated depreciation for the period is 250. The depreciation expense account is debited and the Accumulated Depreciation (reserve) account is credited for that amount.

Journal Entries for Additions

The following journal entry is created from your payables application:

Account	Debit	Credit
Asset Clearing	4,000 USD	None
Accounts Payable Liability	None	4,000 USD

The following journal entry is created from Assets:

Account	Debit	Credit
Asset Cost	4,000 USD	None
Depreciation Expense	250 USD	None
Asset Clearing	None	4,000 USD
Accumulated Depreciation	None	250 USD

In an alternate scenario, the new server computer was purchased and placed in service in year 1, quarter 1. However, the asset is entered into Assets in year 2, quarter 2.

The following journal entry is created from your payables application:

Account	Debit	Credit
Asset Clearing	4,000 USD	None
Accounts Payable Liability	None	4,000 USD

The following journal entry is created from Assets:

Account	Debit	Credit
Asset Cost	4,000 USD	None
Depreciation Expense	250 USD	None
Depreciation Expense (Adjustment)	1,250 USD	None
Asset Clearing	None	4,000 USD
Accumulated Depreciation	None	1,500 USD