Matta Company has just acquired two assets:

1. New diagnostic equipment for the medical services division was acquired at an invoice price of $93,000. This did not include the 8.7% sales tax. Transportation cost of $2,650 was incurred to ship the equipment from the factory to Matta’s medical center. During transit, the driver “forgot” to acquire a special required permit, and Matta was fined $425. When the equipment was unloaded at the medical center, eight feet of wall on the right side of the entry door had to be dismantled (and then rebuilt) to provide a larger opening to get the equipment into the building. The cost of labor and materials was $750. In addition, while the equipment was being moved through the opening, the left side of the doorway was inadvertently damaged. Fortunately, this cost only an additional $300 because workers were already on site. Setup and testing costs to calibrate the equipment properly before it could be used on patients cost another $2,700.

2. Manufacturing equipment was acquired by the semiconductor electronics division. The supplier of the equipment agreed to deliver the equipment, install it, and calibrate it to Matta’s specifications, all as part of the negotiated selling price. Sales tax of 7.5% was not included in the selling price and was paid separately. Matta and the supplier agreed on the following terms: a $77,000 down payment, followed by three equal annual installment payments of $85,000 that include 8% interest on the unpaid balance.

Required

A. Matta’s accounting staff has requested your advice and counsel as to the cost at which each of these assets should be entered into Matta’s accounting records. Provide that advice, carefully specifying exactly how you came to each judgment you made.

B. Determine the amount by which net income would differ in the first year if Matta chose to use the straight-line depreciation method instead of double-declining-balance. Both assets have estimated useful lives of six years and zero estimated residual value.