On October 1, 2017, Winter Corp

question 167

Essay

On October 1, 2017, Winter Corp. buys a computer system for $270,000 in cash. Assume that the computer is expected to have a five-year life and an estimated salvage value of $30,000 at the end of that time.

Required
1. Prepare the journal entry to record the purchase of the computer on October 1, 2017.
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 October 2017.
5. Compute the computer’s carrying value that will be shown on Winter’s balance sheet prepared on December 31, 2017.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be eliminated through diversification, often related to economic, political, or social factors.

Market Risk

Variation on the return on a stock investment caused by things that tend to affect all stocks.

Stand-Alone Risk

The risk associated with investing in a stock that’s held by itself, outside of a portfolio. Stand-alone risk depends on the volatility of a stock’s own return rather than on the effect its inclusion has on the volatility of the return of a portfolio.

Business Risk

The potential for loss or failure in the operation of a company, often due to external and internal factors.