Vargas Company purchased a computer for $3,800 on January 1, 2016. The computer is estimated to have a 5-year useful life and a $900 salvage value. What adjusting entry would Vargas record on December 31, 2016 to recognize expense related to use of the computer

31 Dec 2016 Depreciation expense $580 Dr

Accumulated depreciation-Computer $580 Cr

Explanation:

The adjusting entry that will be made at the year end will be of depreciation expense for the year that will be recorded as an debit to depreciation expense and credited to accumulated depreciation.

The depreciation expense per year will be:

Depreciation expense = (Cost - salvage value) / estimated useful life

Depreciation expense = (3800 - 900) / 5 = $580