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On January 2 , 2 0 2 1 , Athol Company bought a machine for use in operations. The machine has an estimated useful life
On January Athol Company bought a machine for use in operations. The machine has an estimated useful life of eight years and an estimated residual value of $ The company provided the following information:
Invoice price of the machine, $
Freight paid by the vendor per sales agreement, $
Installation costs, $ cash.
Cost of cleaning up the supplies, boxes, and other garbage that remained after the installation of the machine, $ cash.
Payment of the machine's price was made as follows:
January :
Issued common shares of Athol Company at $ per share.
Signed a $ note payable due April plus percent interest.
Balance of the invoice price to be paid in cash. The invoice allows for a percent cash discount if the cash payment is made by January
January : Paid the balance of the invoice price in cash.
April : Paid the note payable and interest in cash.
On June the company completed the replacement of a major part of the machine that cost $ This expenditure is expected to reduce the machines operating costs, increase its estimated useful life by two years, and decrease its estimated residual value to $
Assume that on October the company decided to replace the machine with a newer, more efficient model. It then sold the machine to Sako Ltd on that date for $ cash.
Required:
Compute the acquisition cost of the machine.
Prepare the journal entries to record the purchase of the machine and subsequent cash payments on January and April Do not round intermediate calculations and round your final answers to the nearest dollar amount. If no entry is required for a transactionevent select No journal entry required" in the first account field.
Compute the depreciation expense for each of the years and assuming the companys fiscal year ends on December Use the straightline depreciation method. Do not round intermediate calculations and round your final answers to the nearest dollar amount.
Prepare the journal entry to record the sale of the machine on October Hint: First determine the balance of the accumulated depreciation account on that date.Do not round intermediate calculations and round your final answers to the nearest dollar amount. If no entry is required for a transactionevent select No journal entry required" in the first account field.
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