A Company Purchased a Computer System on January 1,2009,for $1,600,000

question 194

Essay

A company purchased a computer system on January 1,2009,for $1,600,000.Prepare the journal entries to record depreciation for the first 6 months of 2011 and the sale of the computer assuming it is sold on July 1,2011,for $1,000,000 cash.The straight-line method of depreciation was used based on an expected life of six years and a salvage value of $130,000.

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Definitions:

Time Period Assumption

The accounting principle that allows the life of a company to be divided into time periods, such as months or years, for reporting purposes.

Company Life

A conceptual term generally referring to the length of time a company has been in business or is expected to operate.

Dodd-Frank Act

A comprehensive and complex piece of financial regulation in the United States, enacted in 2010 to prevent the recurrence of financial crises.

Clawback

A provision under which money already paid must be returned, often used in employment contracts for the return of bonuses or in investment agreements.