SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 8.) Kate's business is growing faster than she had predicted. In order to keep up, she will need to purchase computer has a lot of memory. In addition, her files are very large and she is running out of free space SP9. improved computer hardware. Kate has learned that the software that she uses runs much fastontelase on her existing hard drive. Finally, Kate has heard horror stories about hard disk drive crashes and possibility that all of her work will be destroyed. In order to protect against this possibility, she ba decided to invest in a large commercial grade backup system. The cost of the memory and hard disk drive upgrade to Kate's computer will total $420. The cost of the backup system is $3,000. The memory and hard disk upgrade will increase the productivity of Kate's current computer; however, it will not extend its useful life. The backup system is expected to have a five-year useful life. Kate would like to know the following items: 1. How should the expenditure for the memory and hard disk drive upgrade be recorded? Provide the journal entry. 2. Kate's current computer has 42 months remaining for depreciation purposes (under the straight-line method). The original cost of the computer was $4,800 and had a four-year useful life. The current monthly depreciation is $100. How will this current expenditure affect the monthly depreciation? 3. Kate would like to know how depreciation on the backup system under both the straight-line method and the double-declining method differ. She is assigning a $500 salvage value to the equip- ment. Construct a table showing yearly depreciation under both methods.
SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 8.) Kate's business is growing faster than she had predicted. In order to keep up, she will need to purchase computer has a lot of memory. In addition, her files are very large and she is running out of free space SP9. improved computer hardware. Kate has learned that the software that she uses runs much fastontelase on her existing hard drive. Finally, Kate has heard horror stories about hard disk drive crashes and possibility that all of her work will be destroyed. In order to protect against this possibility, she ba decided to invest in a large commercial grade backup system. The cost of the memory and hard disk drive upgrade to Kate's computer will total $420. The cost of the backup system is $3,000. The memory and hard disk upgrade will increase the productivity of Kate's current computer; however, it will not extend its useful life. The backup system is expected to have a five-year useful life. Kate would like to know the following items: 1. How should the expenditure for the memory and hard disk drive upgrade be recorded? Provide the journal entry. 2. Kate's current computer has 42 months remaining for depreciation purposes (under the straight-line method). The original cost of the computer was $4,800 and had a four-year useful life. The current monthly depreciation is $100. How will this current expenditure affect the monthly depreciation? 3. Kate would like to know how depreciation on the backup system under both the straight-line method and the double-declining method differ. She is assigning a $500 salvage value to the equip- ment. Construct a table showing yearly depreciation under both methods.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:SERIAL PROBLEM: KATE'S CARDS
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 8.)
Kate's business is growing faster than she had predicted. In order to keep up, she will need to purchase
computer has a lot of memory. In addition, her files are very large and she is running out of free space
SP9.
improved computer hardware. Kate has learned that the software that she uses runs much fastontelase
on her existing hard drive. Finally, Kate has heard horror stories about hard disk drive crashes and
possibility that all of her work will be destroyed. In order to protect against this possibility, she ba
decided to invest in a large commercial grade backup system.
The cost of the memory and hard disk drive upgrade to Kate's computer will total $420. The cost
of the backup system is $3,000. The memory and hard disk upgrade will increase the productivity of
Kate's current computer; however, it will not extend its useful life. The backup system is expected to
have a five-year useful life.
Kate would like to know the following items:
1. How should the expenditure for the memory and hard disk drive upgrade be recorded? Provide the
journal entry.
2. Kate's current computer has 42 months remaining for depreciation purposes (under the straight-line
method). The original cost of the computer was $4,800 and had a four-year useful life. The current
monthly depreciation is $100. How will this current expenditure affect the monthly depreciation?
3. Kate would like to know how depreciation on the backup system under both the straight-line
method and the double-declining method differ. She is assigning a $500 salvage value to the equip-
ment. Construct a table showing yearly depreciation under both methods.
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