Question 1 Mark\'s Repair Service uses the straight-line method of depreciation.

Question

Question 1 Mark's Repair Service uses the straight-line method of depreciation. The company's fiscal year end is December 31. The following transactions and events occurred during the first three years. 2016 July 1 Purchased equipment from the Equipment Center for $5,500 cash plus sales tax of $305, and shipping costs of $250. Nov. 3 Incurred ordinary repairs on computer of $240. Dec. 31 Recorded 2016 depreciation on the basis of a four-year life and estimated salvage value of $455. 2017 Dec. 31 Recorded 2017 depreciation. 2018 Jan. 1 Paid $1,800 for a major upgrade of the equipment. This expenditure is expected to increase the operating efficiency and capacity of the equipment. Prepare the necessary entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Debit Credit Date Account Titles and Explanation 2016 July 1 2016 Nov. 3 2016 Dec. 31 2017 Dec. 31 2018 Jan. 1

Explanation / Answer

Date Account Titles & Explanation Debit $ Credit $ 2016 July 1 Equipment (5500+ 305+ 250) 6055 Cash 6055 2016 Nov 3 Maintenance and repair Expenses 240 Cash 240 2016 Dec 31 Depreciation Expense 700 Accumulated Depreciation- Equipment {(6055-455) / 4 } X 1/2 2017 Dec 31 Depreciation Expense 1400 Accumulated Depreciation- Equipment 1400 {(6055-455) / 4 } 2018 Jan 1 Equipment 1800 Cash 1800

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