At the beginning of 2011, Macon Drugstore purchased a new computer system for \(\$ 48,000\). It is expected to have a five-year life and a \(\$ 3,000\) salvage value.
Required

a. Compute the depreciation for each of the five years, assuming that the company uses
(1) Straight-line depreciation.
(2) Double-declining-balance depreciation.

b. Record the purchase of the computer system and the depreciation expense for the first year under straight-line and double-declining-balance methods in a financial statements model like the following one:

c. Prepare the journal entries to recognize depreciation for each of the five years, assuming that the company uses
(1) Straight-line depreciation.
(2) Double-declining-balance depreciation.

Transcribed Image Text:

Assets = Equity Rev. - Exp. = Net Inc. Cash Flow Cash Book Value of Comp. Sys. = Ret. Earn.