(Learning Objective 1, 3: Recording depreciation; cash flows) Suppose that on January 1 Callaway Golf Company paid cash of $30,000 for computers that are expected to remain useful for 3 years. At the end of 3 years, the computers’ values are expected to be zero.
1. Make journal entries to record (a) purchase of the computers on January 1 and (b) annual depreciation on December 31. Include dates and explanations, and use the following accounts: Computer Equipment; Accumulated Depreciation—Computer Equipment; and Depreciation Expense Computer Equipment.
2. Post to the accounts and show their balances at December 31.
3. What is the computer equipment’s book value at December 31?