Question
On July 1, 20X1, Gamma Corporation purchased a computer system for $30,000 cash. The computer system has an estimated useful life of 4 years and
On July 1, 20X1, Gamma Corporation purchased a computer system for $30,000 cash. The computer system has an estimated useful life of 4 years and no residual value. Using the straight-line method, calculate the depreciation expense for the year 20X1.
Additionally, Gamma Corporation made the following transactions during 20X1:
- August 15: Gamma Corporation purchased software licenses for the computer system for $5,000.
- October 1: Gamma Corporation paid $2,000 for maintenance services to ensure the proper functioning of the computer system.
- December 31: Gamma Corporation paid $1,200 for an annual software subscription to receive updates and technical support.
Furthermore, Gamma Corporation provided the following information regarding its financial statements for the year 20X1:
| Date | Description | Amount |
|---|---|---|
| July 1 | Computer system purchase | $30,000 |
| August 15 | Software licenses | $5,000 |
| October 1 | Maintenance services | $2,000 |
| December 31 | Software subscription | $1,200 |
Required:
- Calculate the total depreciation expense for the year 20X1 for the computer system.
- Prepare the journal entries to record the computer system-related transactions for Gamma Corporation during the year 20X1.
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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
7th Canadian edition
1119368456, 978-1119211587, 1119211581, 978-1119320623, 978-1119368458
