Question

Chapter 9 Homework 6 Saved Help Save & Exit Submit Check my work 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. 166 points Required: 1. Indicate the effects (accounts, amounts, and +for increase, for decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation 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? Hint Complete this question by entering your answers in the tabs below Print Required 1Required 2 Required 3 Required 4 References Indicate the effects (accounts, amounts, and + for increase,-for decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. (Enter any decre with a minus sign.) Sto Date Jan. 1 Jan. 2 Assets Liabilities Jan. 3 Jan. 5 KPrev 3 of 5 Next

Answer 1

35 1 36 Date 37 38 39 Liabilities Stockholder's Equity No Entry Long term Note Payable 1-Jan No Entry No Entry NA 2-Jan Machinery (expense)Freight Net Income (expense)Freight Net Income 3-Jan Machinery 41 5-Jan Machinery 45 Cost Price of the Machine Add Freight Installation Cost Acquisition Cost of the machine 40000 350 2750 50 513 52 53 54 Cost Price of Machinery Less Salvage Value Depreciable Value(A) Number of Years of Life (B) Depreciation Amount (A/B) 42750 4750 10 3800

57 4) 58 59 60 61 62 63 64 65 Beginning Value Depreciation Expense Accumulated Depreciation Book Value (A-B) Year 1st Year 2nd Year 42,750 38,950 3,800 3,800 3,800 7,600 38,950 35,150 At the end of the 2nd year Book Value will be $35,150