Consider the following exercise and scenario from Pratt p361:
On January 1, 2020, Johnson Industries paid $9,000 for a computer system and an additional $3,000 for software. For 2020 and 2021, depreciation is recorded evenly across the two-year period.
Complete the tasks below against the following scenarios:
Scenario 1:
Software cost capitalized; expected useful life of computer and software is three years.
Scenario 2:
Software cost capitalized; expected useful life of computer and software is two years.
Scenario 3:
Software cost expensed; expected useful life of computer is three years.
Compute the year-end balance sheet value of the asset for each of the two years.
Compute the year-end balance sheet value of the asset and the depreciation effect on the company’s net income for each of the two years (ignore taxes).
Consider the following exercise and scenario from Pratt p361: On January 1, 2020, Johnson Industries paid $9,000 for a computer system and an additional $3,000 for software. For 2020 and 2021, depreciation is recorded evenly across the two-year period. Complete the tasks below against the following scenarios: Scenario 1: Software cost capitalized; expected useful life of computer and software is three years. Scenario 2: Software cost capitalized; expected useful life of computer and software is two years. Scenario 3: Software cost expensed; expected useful life of computer is three years. 1- Compute the year-end balance sheet value of the asset for each of the two years. 2- Compute the year-end balance sheet value of the asset and the depreciation effect on the company’s net income for each of the two years (ignore taxes).