Question

Exercise 8-9A Computing and recording straight-line versus double-declining-balance depreciation LO 8-2, 8-3

At the beginning of Year 1, Copland Drugstore purchased a new computer system for 85,000. It is expected to have a five-year life and a $15,000 salvage value.

Exercise 8-9A Part a

Required
a. Compute the depreciation for each of the five years, assuming that the company uses

(1) Straight-line depreciation.

(2) Double-declining-balance depreciation.

Year 1

Year 2

Year 3

Year 4

Year 5

b. Record the purchase of the computer system and the depreciation expense for the first year under straight-line and double-declining-balance methods in a financial statements model like the following one: (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity and NA to indicate the element is not affected by the event. Enter any decreases to account balances with a minus sign.)

c. Prepare the journal entries to recognize depreciation for each of the five years, assuming that the company uses

(1) Straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

(2) Double-declining-balance depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1