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Chapter 3: Q 8SE-3 (page 159)

On October 1, Orlando Gold Exchange paid cash of $57,600 for computers that are expected to remain useful for three years. At the end of three years, the value of the computers is expected to be zero. Requirements 1. Calculate the amount of depreciation for the month of October using the straightline depreciation method. 2. Record the adjusting entry for depreciation on October 31. 3. Post the purchase of October 1 and the depreciation on October 31 to T-accounts for the following accounts: Computer Equipment, Accumulated Depreciation— Computer Equipment, and Depreciation Expense—Computer Equipment. Show their balances at October 31. 4. What is the computer equipment’s book value on October 31?

Short Answer

Expert verified

T-accounts are as follows:

Computer Equipment

Oct.1

57,600

Bal.

57,600

Accumulated Depreciation— Computer Equipment

1,600

Oct.31

1,600

Bal.

Depreciation Expense—Computer Equipment

Oct.31

1,600

Bal.

1,600

Step by step solution

01

Step-by-Step SolutionStep 1: Explanation on Depreciation Expense

Depreciation expense is the process which allocates the cost of asset over the useful life of the asset.

02

Explanation on T-account

As per the T-account, after posting the purchase and adjusting entries, balance of Computer Equipment equals $57,600, Accumulated Depreciation— Computer Equipment equals $1,600 and Depreciation Expense—Computer Equipment equals $1,600.

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