During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $24,000. On the date of delivery, January 2, the company paid $10,000 on the machine, with the balance on credit at 12 percent interest due in six months. On January 3, it paid $600 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,200. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $4,700.

Required:

1. Indicate the effects (accounts, amounts, and + or − ) of each transaction on the accounting equation. Use the following schedule:

5. What would be the net book value of the machine at the end of Year 2? 

Transcribed Image Text:

Date January 1 January 2 January 3 January 5 July 1 No effect Cash Equipment Cash Equipment Cash Equipment Cash Assets (10,000) 24,000 (600) 600 (2,200) 2,200 14,450 X II X Answer is not complete. Liabilities Short term note payable Short term note payable 14,000 (14,000) + Stockholders Equity Interest expense X Answer is complete but not entirely correct. Equipment Depreciation expense Depreciation expense Net book value at end of year 2 X X $ $ 26,800 (2,210) (2,210) X 22,380 Date January 1 January 2 January 3 January 5 July 1 No effect Cash Equipment Cash Equipment Cash Equipment Cash Assets (10,000) 24,000 (600) 600 (2,200) 2,200 14,450 X II X Answer is not complete. Liabilities Short term note payable Short term note payable 14,000 (14,000) + Stockholders Equity Interest expense X Answer is complete but not entirely correct. Equipment Depreciation expense Depreciation expense Net book value at end of year 2 X X $ $ 26,800 (2,210) (2,210) X 22,380

Answer rating: 100% (QA)

1st Requirement 24000 10000 14000 12 612 14840 Amount of 14840 is correct but you ... View the full answer