In: Accounting
On January 2, 2018, 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:
January 2:
January 15: Paid the balance of the invoice price in cash.
April 16: Paid the note payable and interest in cash.
1. Compute the acquisition cost of the machine.
2. Prepare the journal entries to record the purchase of the machine and subsequent cash payments on January 15 and April 16, 2018. (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.)
January 2, 2018: Record purchase of machine by issuing shares, signing a note and the balance on account.
January 2, 2018: Record payment of machine installation costs.
January 15, 2018: Record payment made after discount period.
April 16, 2018: Record payment of note and interest
3. Compute the depreciation expense for each of the years 2018, 2019, and 2020, 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.)
4. Prepare the journal entry to record the sale of the machine on October 1, 2025. (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.)