Mark's Repair Service Uses the Straight-Line Method of Depreciation

question 58

Essay

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.
2013 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 2013 depreciation on the basis of a four-year life and estimated salvage value of $455
2014 Dec. 31 Recorded 2014 depreciation.
2015 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.
Instructions
Prepare the necessary entries. (Show computations.)

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Definitions:

Cost Leadership

A business strategy aimed at becoming the lowest-cost producer in an industry.

Overhead

Ongoing business expenses not directly tied to creating a product or service but necessary for the business's operation, such as rent, utilities, and administrative costs.

Inventory Management

The process of overseeing and controlling the ordering, storage, and use of components that a company will use in the production of the items it will sell as well as overseeing the quantities of finished products for sale.

Strategy

A plan of action designed to achieve a major or overall aim, often involving the allocation of resources and consideration of competitors.