Question

Foley 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.

2013	July 1	Purchased a computer from the Computer Center for $1,900 cash plus sales tax of $150, and shipping costs of $50.
	Nov. 3	Incurred ordinary repairs on computer of $140.
	Dec. 31	Recorded 2013 depreciation on the basis of a four year life and estimated salvage value of $500.
2014	Dec. 31	Recorded 2013 depreciation.
2015	Jan. 1	Paid $300 for an upgrade of the computer. This expenditure is expected to increase the operating efficiency and capacity of the computer.

Prepare the necessary entries. (Show computations.)

Answer 1

Journal entry :

Date	account & explanation	debit	credit
July 1,2013	Computer (1900+200)	2100
	Cash		2100
	(To record purchase computer)
Nov 3,2013	Repairs and maintenance	140
	Cash		140
	(To record ordinary repairs)
Dec 31,2013	Depreciation expense (2100-500/4)	400
	Accumlated depreciation		400
	(To record depreciation)
Dec 31,2014	Depreciation expense	400
	Accumlated depreciation		400
	(To record depreciation)
Jan 1,2015	Computer	300
	Cash		300
	(To record upgrade cost)