On January 2, 2015, 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 $1,500. The company provided the following information: a. Invoice price of the machine, $70,000. b. Freight paid by the vendor per sales agreement, $800. c. Installation costs, $2,000 cash. d. Cost of cleaning up the supplies, boxes, and other garbage that remained after the installation of the machine, $100 cash. e. Payment of the machine's price was made as follows: January 2: Issued 1,000 common shares of Athol Company at $5 per share. Signed a $40,000 note payable due April 16, 2015, plus 12 percent interest. Balance of the invoice price to be paid in cash. The invoice allows for a 2 percent cash discount if the cash payment is made by January 11. January 15: Paid the balance of the invoice price in cash. April 16: Paid the note payable and interest in cash. f. On June 30, 2017, the company completed the replacement of a major part of the machine that cost $12,375. This expenditure is expected to reduce the machine's operating costs, increase its estimated useful life by two years, and decrease its estimated residual value to $1,000. g. Assume that on October 1, 2022, 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 $22,000 cash. Required: 1. Compute the acquisition cost of the machine. Acquisition cost 3. Prepare the journal entries to record the purchase of the machine and subsequent cash payments on January 15 and April 16, 2015. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 > Record purchase of machine by issuing shares, signing a note and the balance on account. Note: Enter debits before credits. Date General Journal Debit Credit January 02, 2015 : No journal entry required Accounts payable Cash Record entry Common shares View general journal 4. Compute the depreciation expense for each of the years 2015, 2016, and 2017, assuming the company's fiscal year ends on December 31. Use the straight-line depreciation method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount.) Depreciation expense 2015 2016 2017 5. Prepare the journal entry to record the sale of the machine on October 1, 2022. (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 transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record sale of machinery at a gain. Note: Enter debits before credits. Date General Journal Debit Credit October 01, 2022 : No journal entry required Accounts payable Accumulated depreciation Record entry Cash View general journal
