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8
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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
t¢
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
