BioPharma Innovations is reviewing its fixed assets for the year ending December 31, 20X1. The company had the following transactions:

• January 1: Purchased laboratory equipment for $300,000 with an estimated residual value of $30,000 and a useful life of 10 years.
• March 1: Purchased office furniture for $50,000 with an estimated residual value of $5,000 and a useful life of 5 years.
• October 1: Sold machinery for $20,000 that had originally cost $100,000 and had accumulated depreciation of $85,000.

Required:

1. Calculate the annual depreciation expense for the laboratory equipment and office furniture using the straight-line method.
2. Prepare the journal entries to record the purchase of fixed assets, depreciation expense, and sale of machinery.
3. Calculate the gain or loss on the sale of machinery.
4. Discuss the impact of these transactions on the financial statements.