SP9. Kate's business is growing faster than she had predicted. In order to keep up, she...

SP9. Kate's business is growing faster than she had predicted. In order to keep up, she will need to purchase improved computer hardware. Kate has learned that the software that uses runs much faster if her computer has a lot of memory. In, addition, her files are very large and she is running out of free space on her existing hard drive. Finally, Kate had heard horror stories about hard disk drive crashes and the possibility that all of her work will be destroyed. In order to protect against this possibility, she has decided to invest in a large commercial grade backup system.

The cost of the memory and hard disk drive upgrade to Kate's computer will total $420. The cost of the backup system is $3,000. The memory and hard disk upgrade will increase the productivity of Kate's current computer; however, it will not extend its useful life. The backup system is expected to have a five year useful life.

Kate would like to know the following items:

How should the expenditure for the memory and hard disk drive upgrade be recorded? Provided the journal entry.
Kate's current computer has 42 months remaining for depreciation purpose (under the straight-line method). The original cost of the computer was $4,800 and had a four year useful life. The current monthly depreciation is $100. How will this current expenditure affect the monthly depreciation?
Kate would like to know how depreciation on the backup system under both the straight-line method and the double-declining method differ. She is assigning a $500 salvage value to the equipment. Construct a table showing yearly depreciation under both methods

Expert Solution

Dear Student,

Please write in case of any clarification is required.

How should the expenditure for the memory and hard disk drive upgrade be recorded? Provided the journal entry.

Answer
As the Cost of memory and hard disk drive upgrade will increase the productivity of Kate's current computer. So it will be treated as Capital Expenditure.

Journal Entry
	Dr USD	Cr USD
Computer A/c………………Dr	420
To Cash A/c		420

Question>>Kate's current computer has 42 months remaining for depreciation purpose (under the straight-line method). The original cost of the computer was $4,800 and had a four year useful life. The current monthly depreciation is $100. How will this current expenditure affect the monthly depreciation?

Answer:

The cost of Memory and Hard drive is treated as Capital Expenditure, hence it would be depreciated over the time of 42 month ( which is the remaining life of the computer)

The depreciation on USD 420 is calculated as = $ 420/42 months= $ 10 per month. So the total depreciation of the computer would be $ 100+ $ 10= $110.

Question> Kate would like to know how depreciation on the backup system under both the straight-line method and the double-declining method differ. She is assigning a $500 salvage value to the equipment. Construct a table showing yearly depreciation under both methods.

Answer
Table Showing the yearly Depreciation on Backup System under straight-line method (SLM) and the double-declining method, Salvage value is $ 500.

Depreciation under SLM	Depreciation under double-declining method
Rate of Depreciation @16.67% per annum	Rate of Depreciation @33.33% per annum; { 16.67 X 2}
$500	$1,000

Particulars	USD
Cost of Back up System	3000
Less Salvage Value	500
Cost to be depreciated (A)	2500
Expected Life of Back up System in years (B)	5
Depreciation as per SLM ( C=A/B)	500
Rate of Depreciation (C/A)*100	16.6667
*{Amount of Depreciation/Actual Cost}100**

ekkarill92 answered 2 years ago

Part 1 The United States' economy is growing at a faster rate than the economy of...

Part 1 The United States' economy is growing at a faster rate than the economy of its trading partner, the United Kingdom. As a result, the rate of American inflation is increasing. Draw correctly labeled graphs to show how the increase in inflation will affect the supply of the U.S. dollar and demand for the British pound in the foreign exchange market. Based on the scenario, what will happen to the value of the U.S. dollar? Explain. (Make sure you...

Include Graphs The United States' economy is growing at a faster rate than the economy of...

Include Graphs The United States' economy is growing at a faster rate than the economy of its trading partner, the United Kingdom. As a result, the rate of American inflation is increasing. Draw correctly labeled graphs to show how the increase in inflation will affect the supply of the U.S. dollar and demand for the British pound in the foreign exchange market. Based on the scenario, what will happen to the value of the U.S. dollar? Explain. (Make sure you...

Many people think it’s faster to order at the drive-thru than to order inside at fast-food...

Many people think it’s faster to order at the drive-thru than to order inside at fast-food restaurants. To find out, two students randomly selected 10 times over a 2-week period to visit a local Dunkin’ Donuts restaurant. At each of these times, one student ordered an iced coffee at the drive-thru and the other student ordered an iced coffee at the counter inside. The table shows the times, in seconds, that it took for each student to receive their iced coffee after the...

Economies of southern states are growing faster than northern ones, primarily because: Group of answer choices...

Economies of southern states are growing faster than northern ones, primarily because: Group of answer choices technological diffusion is increasing output per worker capital in the north is subject to diminishing returns but not in the south people are moving and the population is growing productivity in the south is increasing

True / False and why? More globalized developing countries are growing faster than less globalized developing...

True / False and why? More globalized developing countries are growing faster than less globalized developing countries.

2) China’s real per capita GDP has been growing significantly faster than that in the U.S....

2) China’s real per capita GDP has been growing significantly faster than that in the U.S. – China’s growth rate was about 10% several years ago, compared to about 3% for the U.S. a) Using the Solow growth model (with no technological progress), is there reason to believe this disparity in growth rates will disappear in time? What about the disparity in income levels per person? b) How is your conclusion affected if you were told that China has a...

We Bring the Rain Irrigation Company is currently growing much faster than the economy. Expected growth...

We Bring the Rain Irrigation Company is currently growing much faster than the economy. Expected growth of the company is 16% for the next 4 years; then it is expected to settle down to a constant 3% growth rate thereafter. The dividend last year was $3.20. Investors' required return on stocks of similar risk is 8%. If you already own 500 shares of We Bring the Rain, what should you do based on a comparison between your calculated intrinsic value...

1. Emily is so successful that she cannot keep up with deliveries. She hires Marco’s Movers,...

1. Emily is so successful that she cannot keep up with deliveries. She hires Marco’s Movers, another local company, to handle the overflow of deliveries. Emily’s Flowers pays Marco a flat fee per delivery, plus mileage. Is Marco an employee of Emily’s Flowers? What is your reasoning? 2. When Emily turns over the floral creations to Marco for delivery, what type of legal relationship is created? What level of care is required of Marco while the flowers are in his...

Natalie is struggling to keep up with the recording of her accounting transactions. She is spending...

Natalie is struggling to keep up with the recording of her accounting transactions. She is spending a lot of time marketing and selling mixers and giving her cookie classes. Her friend John is an accounting student who runs his own accounting service. He has asked Natalie if she would like to have him do her accounting. John and Natalie meet and discuss her business. John suggests that he do the following for Natalie. 1. Hold onto cash until there is...

Diana's editorial business was not growing and she sought ways to expand her client list. She...

Diana's editorial business was not growing and she sought ways to expand her client list. She recognized that technology provided opportunities to bring on new customers, so she instituted a training program for her employees. Which factor of production is described here? labor capital knowledge economics #2Juan has many business ideas that could satisfy the unfulfilled needs of people who live in his community. However, there are laws that govern the type of businesses that private citizens can own and...

Question