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3 November, 05:05

O'Connor Company ordered a machine on January 1 at a purchase price of $100,000.

On the date of delivery, January 2, the company paid $25,000 on the machine and signed a long-term note payable for the balance.

On January 3, it paid $1,000 for freight on the machine.

On January 5, O'Connor paid cash for installation costs relating to the machine amounting to $6,000.

On December 31 (the end of the accounting period), O'Connor recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $10,700.

Required:

1. Indicate the effects (accounts, amounts, and for increase or decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. (Enter any decreases to account balances with a minus sign.)

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Answers (1)
  1. 3 November, 05:27
    0
    Answer and Explanation:

    The effect of each transaction is shown below:-

    Accounting equation

    Assets = Liabilities (+) Equity

    1 Jan No effect No effect No effect

    2 Jan Cash - $25,000 Notes payable $75,000

    Machine + $100,000

    3 Jan Cash - $1,000

    Machine + $1,000

    5 Jan Cash - $6,000

    Machine + $6,000

    Here, + sign indicates the increase in amount and - sign indicated the decrease in amount.
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