Vicario Company purchased a machine on March 1,2012 , at an invoice price of \(\$ 10,000\). On the date of delivery, March 2, 2012, the company paid \(\$ 8,000\) on the machine, and signed a note for the balance at 12 percent interest. On March 3, 2012, it paid \(\$ 250\) for freight on the machine. On March 5, Vicario paid installation costs of \(\$ 475\) relating to the machine. On October 1, 2012, the company paid the balance due on the machine plus the interest. On December 31, 2012 (the end of the accounting period), Vicario recorded straight-line depreciation on the machine based on an estimated useful life of 10 years and an estimated residual value of \(\$ 1,725\).

Required (round all amounts to the nearest dollar):

1. Indicate the accounts affected and the amount and direction ( + for increase and - for decrease) of the effect of each transaction (March 1,2,3,5, and October 1) on the accounting equation. Use the following headings:

2. Compute the acquisition cost of the machine.
3. Compute the depreciation expense to be reported for 2012.
4. What is the impact on the cost of the machine of the interest paid on the 12 percent note? Under what circumstances can interest expense be included in an asset's cost?
5. What would be the carrying amount of the machine at the end of 2013 ?

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Date Assets = Liabilities + Shareholders' Equity