Problem
McCartney Mfg. purchased a dryer for $100,000 on January 1, 2011. The estimated life of the dryer is ?ve years, and the salvage value is estimated to be $10,000. McCartney uses the straight-line method of depreciation. Each year, McCartney pays $1,000 to have the dryer serviced. On January 1, 2015, McCartney paid 53 160,000 to have the dryer overhauled, which increased the speed of the dryer and extended its estimated useful life to December 31, 2018.
Task
1. Provide the journal entry on January 1, 2011, to record the purchase of the dryer.
2. How should the service cost be recorded?
3. Compute the depreciation expense that would be recognized during each year of the dryer's eight years of useful life.