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. 2016 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 2016 depreciation on the basis of a four year life and estimated salvage value of $500. 2017 Dec. 31 Recorded 2017 depreciation. 2018 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. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit

Answer 1

The necessary journal entries for the Foley Word Processing Service have been provided.

Step-by-step explanation:

1. July 1, 2016: Dr. Computer Equipment $2,100 Cr Cash $2,100 (Purchased computer for $1,900 + sales tax $150 + shipping costs $50)
2. Nov. 3, 2016: Dr. Miscellaneous Expense $140 Cr Cash $140 (Incurred ordinary repairs on computer)
3. Dec. 31, 2016: Dr. Depreciation Expense $400 Dr Accumulated Depreciation $400 Cr Computer Equipment $800 ($1,900 cost - $500 estimated salvage value divided by 4 years)
4. Dec. 31, 2017: Dr. Depreciation Expense $400 Dr Accumulated Depreciation $400 Cr Computer Equipment $800 (Same as 2016)
5. Jan. 1, 2018: Dr. Computer Equipment $300 Cr Cash $300 (Paid for computer upgrade)

Answer 2

Answer and Explanation:

The Journal entry is shown below:-

On July 1 2016

Computer Dr, $2,100 ($1900 + $150 + $50)

To Cash $2100

(Being purchase of computer is recorded)

On Nov. 3 2016

Repairs and maintenance Dr, $140

To Cash $140

(Being ordinary repairs is recorded)

On Dec 31 2016

Depreciation expense Dr, $ 400 ($2100 - $500 ÷ 4)

To Accumulated depreciation $400

(Being depreciation expense is recorded)

On Dec 31 2017

Depreciation expense $400

To Accumulated depreciation $400

(Being depreciation expense is recorded)

On Jan 1 2018

Computer Dr, $300

To Cash $300

(Being upgrade cost is recorded)