At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year life and a $35,000 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.
At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year life and a $35,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Topic Video
Question
![At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year life
and a $35,000 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdb79813f-f1c2-46b7-ae3e-dd459b137e63%2F73bea49d-7c44-41e2-bd7a-7d55a739cfe9%2Fug3z5nt_processed.png&w=3840&q=75)
Transcribed Image Text:At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year life
and a $35,000 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.
![Reg A1
Reg A2
Reg 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. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an
investing activity (IA), or a financing activity (FA). If an element is not affected by the event, leave the cell blank. Enter any decreases
to account balances and cash outflows with a minus sign. Not all cells will require entry.)
Show less A
COPELAND DRUGSTORE
Horizontal Statements Model
Balance Sheet
Income Statement
Stockholders'
Assets
Equity
Statement of
Revenue
Expenses = Net Income
Cash Flows
Book Value
+ of Computer
System
Retained
Earnings
Cash
Purchase of computer system
225,000 =
Straight-Line Depreciation
0 =
of
IA
0-
38,000 =
of
Double-Declining-Balance Depreciation
90,000 :](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdb79813f-f1c2-46b7-ae3e-dd459b137e63%2F73bea49d-7c44-41e2-bd7a-7d55a739cfe9%2Fefettyv_processed.png&w=3840&q=75)
Transcribed Image Text:Reg A1
Reg A2
Reg 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. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an
investing activity (IA), or a financing activity (FA). If an element is not affected by the event, leave the cell blank. Enter any decreases
to account balances and cash outflows with a minus sign. Not all cells will require entry.)
Show less A
COPELAND DRUGSTORE
Horizontal Statements Model
Balance Sheet
Income Statement
Stockholders'
Assets
Equity
Statement of
Revenue
Expenses = Net Income
Cash Flows
Book Value
+ of Computer
System
Retained
Earnings
Cash
Purchase of computer system
225,000 =
Straight-Line Depreciation
0 =
of
IA
0-
38,000 =
of
Double-Declining-Balance Depreciation
90,000 :
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education