Sheridan'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. 2021 July 1 Purchased equipment from the Equipment Center for $7,900 cash plus sales tax of $580, and shipping costs of $490. Nov. 3 Incurred ordinary repairs on computer of $280. Dec. 31 Recorded 2021 depreciation on the basis of a four-year life and estimated salvage value of $450. 2022 Dec. 31 Recorded 2022 depreciation. Paid $2,900 fora major upgrade of the equipment. This expenditure is expected to increase the operating efficiency and capacity of the equipment. 2023 Jan. 1
Sheridan'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. 2021 July 1 Purchased equipment from the Equipment Center for $7,900 cash plus sales tax of $580, and shipping costs of $490. Nov. 3 Incurred ordinary repairs on computer of $280. Dec. 31 Recorded 2021 depreciation on the basis of a four-year life and estimated salvage value of $450. 2022 Dec. 31 Recorded 2022 depreciation. Paid $2,900 fora major upgrade of the equipment. This expenditure is expected to increase the operating efficiency and capacity of the equipment. 2023 Jan. 1
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 2BCRQ
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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.
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Transcribed Image Text:Sheridan'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.
Purchased equipment from the Equipment Center for $7,900 cash plus sales tax of $580, and shipping costs
of $490.
2021
July 1
Nov. 3
Incurred ordinary repairs on computer of $280.
Dec. 31
Recorded 2021 depreciation on the basis of a four-year life and estimated salvage value of $450.
2022
Dec. 31
Recorded 2022 depreciation.
Paid $2,900 fora major upgrade of the equipment. This expenditure is expected to increase the operating
efficiency and capacity of the equipment.
2023
Jan.
1
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 O for the amounts. Record journal entries in the order presented in the
problem.)
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 O for the amounts. Record journal entries in the order presented in the
problem.)
Date
Account Titles and Explanation
Debit
Credit
2021 July 1
Equipment
Cash
2021 Nov. 3
Cash
2021 Dec. 31
Depreciation Expense
2022 Dec. 31
Depreciation Expense
2023 Jan. 1
Equipment
Cash
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