QUESTION 2 - Accounting for long-lived assets [30 points; 30 minutes) The Vezina Company acquired equipment on January 1, 2008. The following items, paid in cash, were associated with the acquisition of the equipment: Sales price Transportation costs Administrative costs Training costs Installation costs $800,000 $5,000 $ 1,000 $10,000 $10,000 The equipment has an estimated useful life of 10 years, and its residual value is estimated at $56,000. Immediately after the purchase, on January 1, 2008, the company spent $150,000 cash to completely overhaul the equipment, which increased its operating efficiency and its useful life to 15 years. The estimated residual value remained unchanged from its original estimate. On September 30, 2011, the company sold the equipment for $750,000 cash. The company uses the straight-line method of depreciation, and has a December 31 year- end. 2 Required (Show all the calculations): 1. Prepare all the necessary journal entries to record all the transactions related to the equipment for 2008 (Jan-Dec). [16 points] 2. Prepare the journal entries to record the sale of the equipment on September 30, 2011. [8 points) 3. How does depreciation affect cash flows statement? [2 points) QUESTION 2 - Accounting for long-lived assets [30 points; 30 minutes) The Vezina Company acquired equipment on January 1, 2008. The following items, paid in cash, were associated with the acquisition of the equipment: Sales price Transportation costs Administrative costs Training costs Installation costs $800,000 $5,000 $ 1,000 $10,000 $10,000 The equipment has an estimated useful life of 10 years, and its residual value is estimated at $56,000. Immediately after the purchase, on January 1, 2008, the company spent $150,000 cash to completely overhaul the equipment, which increased its operating efficiency and its useful life to 15 years. The estimated residual value remained unchanged from its original estimate. On September 30, 2011, the company sold the equipment for $750,000 cash. The company uses the straight-line method of depreciation, and has a December 31 year- end. 2 Required (Show all the calculations): 1. Prepare all the necessary journal entries to record all the transactions related to the equipment for 2008 (Jan-Dec). [16 points] 2. Prepare the journal entries to record the sale of the equipment on September 30, 2011. [8 points) 3. How does depreciation affect cash flows statement? [2 points)