Chapter 9, Problem 9.16EX

A.

To determine

Capital expenditure: It refers to the amount spent on acquiring, maintaining, and improving the fixed assets that increases its productivity or extends useful life. It provides benefits in the future period.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

$\text{Depreciation = }\frac{\left(\text{Cost of the asset}-\text{Residual value}\right)}{\text{Estimated useful life of the asset}}$

To prepare: the journal entry for the capital expenditure incurred for purchase of a new carpet.

B.

To determine

To record: the adjusting entry for the partial-year depreciation expense for the carpet on December 31.