At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year lifeand a $35,000 salvage value.Requireda. 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 A1Reg A2Reg BRecord 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), aninvesting activity (IA), or a financing activity (FA). If an element is not affected by the event, leave the cell blank. Enter any decreasesto account balances and cash outflows with a minus sign. Not all cells will require entry.)Show less ACOPELAND DRUGSTOREHorizontal Statements ModelBalance SheetIncome StatementStockholders'AssetsEquityStatement ofRevenueExpenses = Net IncomeCash FlowsBook Value+ of ComputerSystemRetainedEarningsCashPurchase of computer system225,000 =Straight-Line Depreciation0 =ofIA0-38,000 =ofDouble-Declining-Balance Depreciation90,000 :

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Description: At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $225,000. It is expected to have a five-year lifeand a $35,000 salvage value.Requireda. Compute the depreciation for each of the five years, assuming that the company

Straight-line Depreciation = (Cost price - Residual value) / Useful life

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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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.

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 :

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