Problem: On July 1, 2008, Red Gate Farm buys a combine for $100,000 in cash. Assume that the combine is expected to have seven year life and an estimated salvage value of $16,000 at the end of that time.
Required:
1. Prepare the journal entry to record the purchase of the combine on July 1, 2008.
2. Compute the depreciable cost of the combine.
3. Using the straight-line method, compute the monthly depreciation.
4. Prepare the adjusting entry to record depreciation at the end of July 2008.
5. Compute the combine's carrying value that will be shown on Red Gate's balance sheet prepared on December 31, 2008.