For each of machines 1, 2 and 3 in Exercise 9.3, outline the effect on reported profits and on the balance sheet, as included in the published financial statements.

Data from in Exercise 9.3

Costa Co. uses three identical pieces of machinery in its factory. The cash price of these machines is €8,000 each and their estimated lives four years. These were all brought into use on the same date by the following means:

a. machine 1 was rented from Brava Co. at a cost of €250 per month payable in advance and terminable at any time by either party;

b. machine 2 was rented from Blanca Co. at a cost of eight half-yearly payments in advance at €1,500;

c. machine 3 was rented from Sol Co. at a cost of six half-yearly payments in advance at €1,500.