Effect of depreciation on the accounting equation and financialstatements
[The following information applies to the questionsdisplayed below.]
The following eventsapply to The Ice Cream Parlor for the 2014 fiscal year: 1. The company started when itacquired $16,000 cash from the issue of common stock. 2. Purchased a new ice creammachine that cost $16,800 cash. 3. Earned $20,300 in cashrevenue. 4. Paid $13,000 cash for salariesexpense. 5. Paid $3,500 cash for operatingexpenses. 6.
Adjusted the records to reflect the use of the ice creammachine. The machine, purchased on January 1, 2014, has an expecteduseful life of five years and an estimated salvage value of $2,600.Use straight-line depreciation. The adjusting entry was made as ofDecember 31, 2014.
3 Part a
Required a. Record the above transactions in a horizontal statements modellike the following one. In the Cash Flow column, indicate whetherthe item is an operating activity (OA), an investing activity (IA),a financing activity (FA) and net change in cash (NC). The lettersNA indicate that an element is not affected by the event.(Enter any decreases to account balances and cash outflowswith a minus sign.)
THE ICE CREAM PARLOR
HORIZONTAL STATEMENTS MODEL
CASH+EQUIPMENT-ACCUMULATED=COMMON+RETAINED REVENUE-EXPENSE=NETSTATEMENT
DEPRECIATION STOCK EARNINGS INCOME OFCASH FLOWS
1
2
3
4
5
6
4 Part b
b. What amount of depreciation expense would The Ice Cream Parlorreport on the 2014 income statement?
DEPRECIATION EXPENSE ( )
5 Part c
c. What amount of accumulated depreciation would The Ice CreamParlor report on the December 31, 2014, balance sheet? ACCUMULATEDDEPRECIATION ( )
6 Part d
d. Would the cash flow fromoperating activities be affected by depreciation in 2014? Yes ( ) No ( )
Effect of depreciation on the accounting equation and financialstatements
[The following information applies to the questionsdisplayed below.]
| The following eventsapply to The Ice Cream Parlor for the 2014 fiscal year: | ||||||||||||||||||||
| 1. | The company started when itacquired $16,000 cash from the issue of common stock. | |||||||||||||||||||
| 2. | Purchased a new ice creammachine that cost $16,800 cash. | |||||||||||||||||||
| 3. | Earned $20,300 in cashrevenue. | |||||||||||||||||||
| 4. | Paid $13,000 cash for salariesexpense. | |||||||||||||||||||
| 5. | Paid $3,500 cash for operatingexpenses. | |||||||||||||||||||
6. | Adjusted the records to reflect the use of the ice creammachine. The machine, purchased on January 1, 2014, has an expecteduseful life of five years and an estimated salvage value of $2,600.Use straight-line depreciation. The adjusting entry was made as ofDecember 31, 2014. 3 Part a
THE ICE CREAM PARLOR HORIZONTAL STATEMENTS MODEL CASH+EQUIPMENT-ACCUMULATED=COMMON+RETAINED REVENUE-EXPENSE=NETSTATEMENT DEPRECIATION STOCK EARNINGS INCOME OFCASH FLOWS 1 2 3 4 5 6 4 Part b
DEPRECIATION EXPENSE ( ) 5 Part c
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Related questions
| Concord Corp. completed thefollowing transactions in 2014, the first year of operation: |
| 1. | Issued 23,000 shares of $22 parcommon stock for $33 per share. |
| 2. | Issued 4,800 shares of $47 par,5 percent, preferred stock at $49 per share. |
| 3. | Paid the annual cash dividend topreferred shareholders. |
| 4. | Issued a 5 percent stock dividend on the common stock. Themarket value at the dividend declaration date was $37 pershare. |
| 5. | Later that year, issued a2-for-1 split on the 24,150 shares of outstanding commonstock. |
| 6. | Earned $271,500 of cash revenuesand paid $139,400 of cash operating expenses. |
Record each of these events in a horizontal statements modellike the following one. In the Cash Flow column, indicate whetherthe item is an operating activity (OA), an investing activity (IA),or a financing activity (FA) and net change in cash (NC). Use NA toindicate that an element is not affected by the event.(Enter any decreases to account balances and cash outflowswith a minus sign.) | |
14 Computing and recording depletion expense
Tishimingo Sand and Gravel paid $772,590 to acquire 849,000cubic yards of sand reserves. The following statements modelreflects Tishimingoâs financial condition just prior to purchasingthe sand reserves. The company extracted 445,725 cubic yards ofsand in year 1 and 382,050 cubic yards in year 2. |
| Required |
| a. | Compute the depletion charge per unit. (Round youranswer to 2 decimal places.) DEPLETION CHARGE PER UNIT ( _________________ per cubicyard) b Record the acquisition of the sand reserves and the depletionexpense for years 1 and 2 in a financial statements model like thepreceding one. The first event is recorded as an example. In theCash Flow column, use OA to designate operating activity, IA forinvestment activity, FA for financing activity and NA to indicatethe element is not affected by the event. (Enter anydecreases to account balances and cash outflows with a minus sign.Round intermediate calculations to 2 decimal places and round yourfinal answers to nearest whole dollaramount.) DEPLETION EXPENSE YEAR 1 ( ) YEAR 2 ( ) 7 Computing and recording straight-line versusdouble-declining-balance depreciation
|
7 Part a
| Required |
| a. | Compute thedepreciation for each of the five years, assuming that the companyuses | |
| (1) | Straight-Linedepreciation. |
STRAIGHT LINE DEPRECIATION ( )
| 2) | Double-Declining-Balance depreciation. (Round youranswers to the nearest whole dollar amount. Leave no cells blank -be certain to enter "0" wherever required.) DOUBLE DECLINING BALANCE YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 |
