Response to the following problem:
Global Flow Inc. purchased a computer on January 1, 2016 for $3,000 cash. It had an estimated useful life of three years and no residual value.
Global Flow made the following changes to the computer:
Mar. 1, 2016 Added storage capacity at a cost of $1,000. This had no effect on residual value or estimated useful life.
Apr. 1, 2017 Added a new processing board for $2,000, which extended the estimated useful life of the computer another three years but did not affect residual value.
Required:
1. Prepare a journal entry to record each of the above expenditures. Assume all amounts are material. Descriptions are not necessary.
2. Calculate and prepare journal entries to record depreciation expense for 2016 and 2017 using the double-declining balance method. Assume a December 31 fiscal year-end and that the company uses the ½ year rule to calculate depreciation expense in the year of acquisition and disposal.