On October 1, 2015, Lyndon, Inc. purchased a computer system for $86,000 from AIT Systems. The computer system had an estimated life of five years and residual value of $3,000. Lyndon paid $2,820 for shipping and insurance and hired an engineering company to install and set up the computer system for $7,500. AIT asked for $20,000 cash payment immediately; in addition, AIT accepted a one-year note payable of $50,000 plus 6% interest due on September 30, 2016. The remaining $16,000 is due in 30 days; however, AIT allowed a 2% discount on this $16,000 if Lyndon makes a payment by October 15. Lyndon paid the invoice on October 31. Lyndon uses the straight-line depreciation method.
On July 1, 2017, Lyndon replaced a hard drive costing $12,000 and, as a result, the useful life of the computer system increased by two years.
On January 10, 2018, the computer system experienced irreparable damage. Lyndon made a claim to the insurance company. Subsequently, Lyndon received $40,000 cash on January 31, 2018.
Requirements
1. Calculate the acquisition cost of the computer system.
2. Prepare all journal entries for 2015, 2016, 2017, and 2018.