On July 1, 2010, Dexter Corp. buys a computer system for $260,000 in cash. Assume that the

Question:

On July 1, 2010, Dexter Corp. buys a computer system for $260,000 in cash. Assume that the computer is expected to have a four-year life and an estimated salvage value of $20,000 at the end of that time.

Required

1. Identify and analyze the transaction for the purchase of the computer on July 1, 2010.

2. Compute the depreciable cost of the computer.

3. Using the straight-line method, compute the monthly depreciation.

4. Identify and analyze the adjustment to record depreciation at the end of July 2010.

5. Compute the computer’s carrying value that will be shown on Dexter’s balance sheet prepared on December 31, 2010.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...