Final Answer:
On January 1, 2020, Pronghorn Company purchased 12 machinery units.
Step-by-step explanation:
Pronghorn Company's acquisition of 12 machinery units on January 1, 2020, signifies a strategic investment in assets to enhance its operational capabilities. This transaction likely involves machinery or equipment necessary for the company's operations or production processes. Such purchases commonly impact a company's balance sheet, as they are considered long-term assets with a specific useful life. The machinery purchased might be utilized in manufacturing, assembly, or other business operations to increase efficiency, productivity, or expand the company's offerings.
In accounting terms, this acquisition will be recorded on the balance sheet under the "Machinery" or "Equipment" asset account. The cost of the 12 machinery units would be capitalized and recorded as an asset, reflecting the historical purchase price. Over time, these machinery units' value will be depreciated, reflecting their wear and tear or obsolescence. Depreciation allocates the cost of the machinery over its useful life, typically calculated using various methods such as straight-line depreciation or declining balance method. This allocation method affects the company's income statement, impacting its profitability and tax liabilities.
Such investments in machinery are critical for businesses aiming to improve operational efficiency or expand their capabilities. It demonstrates Pronghorn Company's commitment to growth and innovation, laying the groundwork for sustained performance and competitiveness in its industry.