Loose-leaf for Fundamentals of Financial Accounting with Connect
5th Edition
ISBN: 9781259619007
Author: Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 9, Problem 9.3E
Determining Financial Statement Effects of an Asset Acquisition and Straight-Line
O’Connor Company ordered a machine on January 1 at a purchase price of $40,000. On the date of delivery, January 2, the company paid $10,000 on the machine and signed a long-term note payable for the balance. On January 3, it paid $350 for freight on the machine. On January 5. O’Connor paid cash for installation costs relating to the machine amounting to $2,400. On December 31 (the end of the accounting period), O’Connor recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $4,750.
Required:
- 1. Indicate the effects (accounts, amounts, and + or −) of each transaction (on January 1, 2, 3, and 5) on the
accounting equation. Use the following schedule:
- 2. Compute the acquisition cost of the machine.
- 3. Compute the depreciation expense to be reported for the first year.
- 4. What should be the book value of the machine at the end of the second year?
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Chapter 9 Solutions
Loose-leaf for Fundamentals of Financial Accounting with Connect
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