In Chapter 2 , on page 98 , we learned that Lee Management Consulting had paid $1,000 cash for a Dell computer on June 3, 2016. The computer is expected to be useful for four years. On June 4, 2016, Lee Management Consulting purchased office furniture on account for $5,000. The furniture was expected to last for five years. Looking back through his records, Michael Lee sees that he recorded $42 of amortization for the equipment and $167 of amortization for the furniture in June. Both assets are assumed to have no residual value at the end of their useful life. Lee is not sure how this was calculated, so he needs some help figuring out the entry required for July 31, 2016.
Required
1. Calculate the amount of amortization for each asset for the month ended July 31, 2016, under the straight-line and double-declining-balance methods in order to figure out what method is being used for the journal entries. Round only the total amounts to the nearest dollar.
2. Which method results in the highest expense?
3. Is the method that results in the highest expense used? What reason would Michael Lee use to justify the choice of method?
4. Journalize the entry to record the amortization expense to July 31, 2016, using the double-declining-balance method results. Use a compound entry.
5. If in December it was learned that the furniture's estimated useful life is really not correct and it should actually last an additional six years from now, what would the December 31, 2016 journal entry look like? Assume all amortization was recorded up to November 30. Round only the journal entry to the nearest dollar.