Problem
On January 2, Year 1, Verdi Company acquired a machine for $240,000 cash. In addition to the purchase price, Verdi spent $5,000 for shipping and installation, and $7,000 to calibrate the machine prior to use. The company estimates that the machine has a useful life of 5 years and residual value of $19,500.
Use the financial statement effects template to show how the following activities affect the balance sheet and income statement:
i. Acquisition of the machine including all costs incurred to prepare it for its intended use.
ii. Depreciation in the first year. Verdi uses the straight-line method of depreciation.
iii. Sale of the machine on December 31, Year 4. Verdi sold the machine to another company for $35,000.