1. Explain why capital expenditures are debited to an asset account and identify three (3) kinds of costs that might be included in the recorded cost of a land. (5 marks)
2. ABC Office Service purchased a new computer system at the beginning of 2021 for $36,000. It is expected to have a five (5)-year useful life and a $6,000 salvage value. The company expects to use the system more extensively in the early years of its life.

Required:

1. Calculate the depreciation expense for each of the five (5) years, assuming the use of straight-line depreciation. (2 marks)
2. Assume that ABC Office Service sold the computer system at the end of the fourth year (2024) for $25,000. Make journal entries to record the disposal of the computer system. (2 marks)