Recording Asset Acquisition, Depreciation, and Disposal (FSET)

On January 2, Year 1, Verdi Company acquired a machine for $336,000 cash. In addition to the purchase price, Verdi spent $7,000 cash for shipping and installation, and $9,800 cash to calibrate the machine prior to use. The company estimates that the machine has a useful life of 5 years and residual value of $27,300.

Use the financial statement effects template to show how the following activities affect the balance sheet and income statement: a. Acquisition of the machine including all costs incurred to prepare it for its intended use. b. Depreciation in the first year. Verdi uses the straight-line method of depreciation. c. Sale of the machine on December 31, Year 4. Verdi sold the machine to another company for $49,000.

		Balance Sheet				Income Statement
		Cash		Noncash		Contra				Contributed		Earned								Net
Transaction		Asset	+	Assets	-	Assets	=	Liabilities	+	Capital	+	Capital				Revenues	-	Expenses	=	Income
a.	Acquisition of machine	Answer		Answer		Answer		Answer		Answer		Answer				Answer		Answer		Answer
b.	First year depreciation	Answer		Answer		Answer		Answer		Answer		Answer				Answer		Answer		Answer
c.	Sale of machine in Year 4	Answer		Answer		Answer		Answer		Answer		Answer				Answer		Answer		Answer