Conover Company ordered a machine on January 1, 2009, at a purchase price of $20

Question

Conover Company ordered a machine on January 1, 2009, at a purchase price of $20,900. On the date of delivery, January 2, 2009, the company paid $7,500 on the machine and signed a note payable for the balance. On January 3, 2009, it paid $390 for freight on the machine. On January 5, Conover paid installation costs relating to the machine amounting to $1,200. On December 31, 2009 (the end of the accounting period), Conover recorded depreciation on the machine using the straight-line method with an estimated useful life of 12 years and an estimated residual value of $3,350.

Indicate the effects (accounts, amounts, and + ,

Conover Company ordered a machine on January 1, 2009, at a purchase price of $20,900. On the date of delivery, January 2, 2009, the company paid $7,500 on the machine and signed a note payable for the balance. On January 3, 2009, it paid $390 for freight on the machine. On January 5, Conover paid installation costs relating to the machine amounting to $1,200. On December 31, 2009 (the end of the accounting period), Conover recorded depreciation on the machine using the straight-line method with an estimated useful life of 12 years and an estimated residual value of $3,350.

Explanation / Answer

Total acquisition costs: All costs necessary to get the asset ready for its intended used are aggregated

$22490 ($20,900 + $390 + $1,200)

Depreciation Expense: Original Cost - Salvage Value / Useful Life

($22,490 - $1,200)/12 = $1,774.16

Book value: Original Cost - Accumulated Depreciation

$22,490 - $1,774,16 = $20,715.83

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