Reference no: EM133151351

Question - After a meeting with upper management at Hawkeye Inc. concluded they would need a new super computer to reduce their production time and cost of the company's current production process. On January 2016 they purchased a new super computer for $150,000. The computer was estimated to have a six-year useful life and

a residual value of $15,000. In February 2020, Hawkeye paid $98,000 to overhaul the entire computer system. The overhaul upgraded to the latest technology and extended its useful life by an additional two years. In May 2020, the computer broke down and required servicing to get it to operate properly. The servicing cost $10,000. Hawkeye year-end is December 31. The estimated residual value remained $15,000, unchanged throughout the period.

Required -

a) Provide the journal entry to record the purchase of the equipment in January 2016.

b) How would you account for the overhaul done in February 2020? Explain your reasoning.

c) How would you account for the servicing done in May 2020? Explain.

d) What effect would the events in (b) and (c) have on Hawkeye depreciation expense?

e) What would be the depreciation expense in each year of the equipment's life, assuming that Hawkeye uses straight-line depreciation?