Reference no: EM131752574

Question: APPLY THE CONCEPTS: Measure and record the purchase of a fixed asset

On October 1, 2011, Atherton Fuel Corp. purchased new equipment from Acme Equipment Company that had a purchase price (including sales tax) of $76,245. Acme charged $1,700 to deliver the equipment and $6,800 to install it at Atherton Fuel's site. Atherton Fuel's accountant provided the payment for the equipment, delivery, and installation to Acme that day. Atherton Fuel had its own master-level employees perform trial runs on the equipment. This took 8.5 hours, and those employees earn $30 per hour. During the trial runs, there was some damage to one of the walls beside the equipment. Atherton Fuel's maintenance staff repaired the wall. The cost for the maintenance wages was $85. All wages for trial runs and wall repair will be paid at the end of the following week.

Create a General Journal

Date	Description		Debit	Credit
Oct 1

How does each row of the above journal entry affect the accounting equation, and on which financial statement is it reported? If it is not affected then select "No effect" as correct answer.

(Increase, Decrease or Not effect)

Row	Assets	Liabilities	Equity	Appears on
1
2
3
4

3) APPLY THE CONCEPTS: Calculate and determine the entry for straight-line depreciation

The equipment purchased by Atherton Fuel Corp. (see the journal entry above) is expected to have a useful life of four years. At the end of its useful life, the residual value of the equipment is estimated to be $5,000. Atherton Fuel Corp.'s fiscal year ends each December 31.

In the table to the below, calculate the equipment's depreciation expense, the balance of accumulated depreciation, and the book value for each year the equipment is expected to be in service, using the straight-line method.

Year	Depreciation Expense	Accumulated Depreciation	Book Value
2011
2012
2013
2014
2015