Question

Vargas Company purchased a computer for $6,400 on January 1, 2016. The computer is estimated to have a 5-year useful life and a $2,200 salvage value. What adjusting entry would Vargas record on December 31, 2016 to recognize expense related to use of the computer?

Answer 1

Purchasing cost of computer = $6,400

useful life of computer = 5 year

salvage value = $2,200

Straight line depreciation per year:

= (Cost - Salvage value) ÷ Useful life

= ($6,400 - $2,200) ÷ 5

= $4,200 ÷ 5

= $840

Therefore, the journal entry is follows:

Depreciation expense A/c Dr. $840

To accumulated depreciation A/c $840

(To record the depreciation expense)