One employee argues that future benefits of the equipment

Reference no: EM13482586

ABC Co recently spent $1,200,000 to acquire a piece of equipment. The accounting staff is unsure how to properly classify and record the purchase. One employee argues that future benefits of the equipment are unknown beyond the current year and that the expenditure should be expensed completely on the current year income statement. Another employee argues that the expenditure will benefit the current year plus two additional years and should be capitalized as a depreciable asset, depreciating it to a $0 salvage value using straight-line over a 3 year time period.

show the financial statement impacts of these two alternatives over the three year period. Ignore income taxes.

Reference no: EM13482586

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