7.4 Laurensmani SpA’s financial year is to 31 December. It uses the straight-line method of depreciation for machinery.

On 1 January 2004 the enterprise purchased a machine for EUR 10,000. The machine had an expected life of four years and an estimated residual value of EUR 2,000.

On 1 January 2005 the enterprise purchased another machine for EUR 15,000 giving in exchange the previous one plus the balance in cash.

Analyse these transactions using the accounting equation on the hypothesis that the difference paid in cash was:

(a) EUR 7,000

(b) EUR 6,000

(c) EUR 9,000.