Question

5) The following information is for X Company for 2019:

Equipment, January 1	$14,690
Equipment, December 31	$16,847
Purchases of equipment	$7,284
Cost of equipment sold	$3,815
Depreciation expense	??

What was depreciation expense in 2019?

A: $1,312

B: $1,535

C: $1,796

D: $2,101

E: $2,459

F: $2,876

7) X Company is a service company and prepares monthly financial statements. In March, it billed customers $401,000 for services it provided; in April, it billed customers $364,000 for services it provided.

In April, the company received $289,000 from its March customers and $266,000 from its April customers.

Which of the following amounts will appear on X Company's April Income Statement and Statement of Cash Flows?

A) Income Statement, $364,000; Statement of Cash Flows, $555,000
B) Income Statement, $555,000; Statement of Cash Flows, $364,000
C) Income Statement, $555,000; Statement of Cash Flows, $765,000
D) Income Statement, $765,000; Statement of Cash Flows, $555,000
E) both statements, $266,000
F) both statements, $364,000

Answer 1

(5)

The Answer is (A) $ 1,312

Opening Balance of Equipment	$ 14,690
Add: Purchases of Equipment	$ 7,284
Less : Cost of Equipment Sold	$ 3,815
Total	$ 18,159
Closing Balance of Equipment	$ 16,847
Depreciation Expenses	$ 1,312

(7)

The Answer is (A) Income Statement $ 364,000; Statement of Cash Flows, $ 555,000

Remark : The revenue will be booked based on the services provided whether it is received or not so Service Billed for April Month $ 364,000 will appeared in income statement. In Cash Flow, actual payment received from customers $ 289,000 + $ 266,000 = $ 555,000 will appeared in April Month's Cash Flow.