Carey Word Processing Service

Carey Word Processing Service - 2008 Jan 1 Paid $500 for an...

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Carey Word Processing Service uses the straight-line method of depreciation. The company's fiscal  year end is December 31.   The following transactions and events occurred during the first three  years. 2006 July 1 Purchased a computer from the Computer Center for $2,500 cash plus sales tax  of $150, and shipping costs of $50. Nov. 3 Incurred ordinary repairs on computer of $140. Dec. 31 Recorded 2004 depreciation on the basis of a four year life and estimated salvage  value of $500. 2007 Dec. 31 Recorded 2005 depreciation.
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Unformatted text preview: 2008 Jan. 1 Paid $500 for an upgrade of the computer. This expenditure is expected to increase the operating efficiency and capacity of the computer. Instructions Prepare the necessary entries. (Show computations.) Solution 2006 July 1Computer Equipment 2,700 Cash 2,700 Nov. 3Repairs Expense 140 Cash 140 Dec. 31Depreciation Expense 275 Accumulated Depreciation 275 [($2,700 – $500) ÷ 4 × 1/2] 2007 Dec. 31Depreciation Expense 550 Accumulated Depreciation ($2,200 ÷ 4) 550 2008 Jan. 1Computer Equipment 500 Cash 500 1...
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