E9-3 determining financial statement effects of an asset acquisition and straight-line depreciation [lo 9-2, lo 9-3] o’connor company ordered a machine on january 1 at a purchase price of $35,000. on the date of delivery, january 2, the company paid $9,000 on the machine and signed a long-term note payable for the balance. on january 3, it paid $400 for freight on the machine. on january 5, o’connor paid cash for installation costs relating to the machine amounting to $2,100. 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 $3,800.

required:

indicate the effects (accounts, amounts, and + for increase, − for decrease) of each transaction (on january 1, 2, 3, and 5) on the accounting equation.
compute the acquisition cost of the machine.
compute the depreciation expense to be reported for the first year.
what should be the book value of the machine at the end of the second year?

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine