Exercise 1 Somerville Corp purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on Hand has a balance of $1,450 on May 1. Purchases of supplies during May amount to $1,100. Supplies on hand at May 31 amount to $920. Prepare the necessary adjusting entry on Somerville's books on May 31. What will be the effect on net income for May if this entry is not recorded? Exercise 3 On July 1, 2014, Dexter Corp. buys a computer system for $260,000 in cash. Assume that the computer is expected to have a four year life and an estimated salvage value of $20,000 at the end of that time. 1. Prepare the journal entry to record the purchase of the computer on July 1, 2014 2. Compute the depreciable cost of the computer. 3. Using the straight-line method, compute the monthly depreciation. 4. Prepare the adjusting entry to record depreciation at the end of July 2014