in january 2004 harvey s hoola hoop company purchased a computer system that cost 37 538672

Account for change in estimates for depreciation. (LO 4)

In January 2004, Harvey’s Hoola Hoop Company purchased a computer system that cost $37,000. Harvey’s estimated that the system would last for 5 years and have a salvage value of $2,000 at the end of 2008. The company uses the straight-line method of depreciation.

Analyze each of the following independent scenarios.

a. Before the depreciation expense is recorded for the year 2006, computer experts tell Harvey’s that the system can be used until the end of 2008 as planned but that it will be worth only $500.

b. Before depreciation expense is recorded for the year2O06, Harvey’s decides that the computer system will last only until the end of 2007. The company anticipates the value of the system at that time will still be $2,000.

c. Before depreciation expense is recorded for the year 2006, Harvey’s decides that the computer system will last until the end of 2008, but that it will be worth only $ 1.000 at that time.

d. Before the depreciation expense is recorded for the year 2006, computer expenses tell Harvey’s that the system can be used until the end of 2012 if the company spends $4,000 on upgrades. However, the estimated salvage value at that time would be $0. Harvey’s decides to follow the experts’ advice and upgrade the computer system.

Required

Calculate the amount of depreciation expense related to the computer system Harvey’s Hoola Hoop Company would report on its income statement for the year ended December 31, 2006, for each scenario.