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Question 8 Partially correct Mark 6.79 out of 8.33 ¥ Remove flag & Edit question Recording Asset Acquisition, Depreciation, and Disposal (FSET) On January 2, Year 1, Verdi Company acquired a machine for $120,000 cash. In addition to the purchase price, Verdi spent $2,500 cash for shipping and installation, and $3,500 cash The company estimates that the machine has a useful life of 6 years and residual value of $9,750. Use the financial statement effects template to show how the following activities affect the balance sheet and income statement: a. Acquisition of the machine including all costs incurred to prepare it for its intended use. b. Depreciation in the first year. Verdi uses the straight-line method of depreciation. c. Sale of the machine on December 31, Year 5. Verdi sold the machine to another company for $17,500. |- EIET IR TET Income Statement Transaction Assets = Liabilities + Capital + TE) Revenues - Expenses a. Acquisition of machine (126,000) v 126,000 v 0v 0ov 0ov 0ov 0v 0ov 0w b. First year depreciation 0v 0v 19375 v 0ov 0ov (19,375) v 0ov 19375 v (19,375) v C. Sale of machine in Year 4 17,500 v (126,000) v (77,500) x 0Ov 0ov (31,000) x (31,000) x 0 x (31,000) x Calculation of annual depreciation expense Cost of machine $120,000 Shipping/installation costs 2,500 Cost to calibrate 3,500 Total cost $126,000 Residual value $116,250 Depreciable cost Life 6 Annual depreciation $19,375 Balance Sheet Income Statement Cash Noncash Contra Contributed Earned Net Transaction Asset + Assets Assets Liabilities + Capital ital Expenses - Income L] Machine (126,000) 126,000 urchase P Cash Machinery ; b 18,375 (18,375) 19,375 (18,375) First year " Acc Retained Deprec deprec Deprec earnings expense c Sale of 17,500 (126,000) (96,875) (11,625) . 11,625 (11,625) machine in P Acc. Retained osls ov: Year4 Machinery Deprec earnings B machine
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