Question

Depreciation

On July 1, 2017, Dexter Corp. buys a computer system for $144,800 in cash. Assume that the computer is expected to have a four-year life and an estimated salvage value of $20,000 at the end of that time.

Required:

1. Identify and analyze the transaction to record the purchase of the computer on July 1, 2017.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

–

Expenses

=

Income

2. Compute the depreciable cost of the computer.
$

3. Using the straight-line method, compute the monthly depreciation.
$ per month

4. Identify and analyze the adjustment to record depreciation at the end of July 2017.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account isincreased, it will have the effect of decreasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

–

Expenses

=

Income

5. Compute the computer's carrying value that will be shown on Dexter's balance sheet prepared on December 31, 2017.
$

Answer 1

Answer is given below

Credit Debit $144,800 Journal Computer To Cash (Being Computer purchased) $144,800 Income Statement Balance Sheet = Liabilities + 1. Stockholders' Equity Assets Revenue Expenses = Net Income $0 Only assets is affected Since Computer is debited and Cash is credited 2 Depreciable cost of computer Residual Cost value $144,800 - $20,000 | Depreciable Cost $124,800 3 Monthly depreciation Residual Cost Expected life 1 years 7 4 Yearly Depreciation $31,200 | Monthly Depreciation $2,600 ($31,200/12) - $20,000 $144,800 Net cost Credit 4 Depreciation for the month of July 2017 Journal Debit Depreciation $2,600 To Accumulated Depreciation (To record Depreciation) $2,600 Income Statement Assets Balance Sheet = Liabilities. Stockholders' Equity -$2,600 Revenue - Expenses - Net Income -$2,600 | $2,600 -$2,600 Accumulated depreciation is reduce from cost of Asset 5 Computer's carrying value December 31st 2017 Purchase Cost Less: Accumulated Depreciation Carrying cost December 31st, 2017 $124,800 $15,600 ($2,500*6) $109,200