Question

On January 1, Year 1, Naples purchased a computer system that cost $1,480,000. The estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to be used. On January 1, Year 2, Naples determined that the estimated useful life of the computer would be 4 years instead of 3 years. The estimated salvage value will only be $10,000. Prepare the journal entry to record depreciation expense for Year 1. Prepare the journal entry to record depreciation expense for Year 2. Font family Font size Paragraph Arial 3 (12pt) Path: p Words:

Answer 1

Solution 1:

Depreciation for Year 1 = ($1480000 - $40000) / 3 = $480,000

Date	General Journal	Debit	Credit
31-dec-Year 1	Depreciation expense	480000
First Year	Accumulated Depreciation		480000

Solution 2:

Book value on January 1, Year 2 = $1480000 - $480000 = $1,000,000

New Remaining Life = 4 years - 1 year = 3 years

New Residual value = $10,000

Depreciation for Year 2 = ($1000000 - $10000) / 3 = $330,000

Date	General Journal	Debit	Credit
31-dec-Year 2	Depreciation expense	330000
	Accumulated Depreciation		330000