Question

Background Information: 1 The company started when it acquired $55,000 cash issuing common stock 2 Purchased a new industrial oven that cost $35,000 cash 3 Earned $75,000 in cash revenue 4 Paid $30,000 cash for salaries Expense 5 Adjustment for use of industrial oven. Purchased on January 2 ,2018 with a useful life of 4 years and salvage value of $4,000 Straight-line Depreciation was used of the entry on December 31,2018 a) Compete the accounting equation Goofy Company Accounting Equation Balance Sheet Income Statement Event Assets Accumulated Stockholders Equity Cash + Equipment - Depreciation = Common Stock + Retained Earnings Revenue - Expense = Net Income 1 $55,000 2 (35,000) 3 75,000 4 (30,000) 5 Total $65,000 + $- - $- = $- + $- $- - $- = $- b) What amount of depreciation expense should be reported on the 2018 income statement? c) What amount of accumulated depreciation would be reported on the 2019 Year-End Balance Sheet? Helpful Resources What Are the Main Types of Depreciation Methods? Capital Asset Depreciation - Straight-Line

Answer 1

Sollution a
	Balance Sheet	Income Statement
	Assets		Equity	Revenues	-	Expenses	=	Net income
Event	Cash	+	Equipment	-	Accumulated	=	Common	+	Retained	Statement of Cash
Depreciation	Stock	Earnings	Flows
1	$55,000	+		-		=	$55,000	+			-		=		$55,000	FA
2	($35,000)	+	$35,000	-		=		+					($35,000)	IA
3	$75,000	+		-		=		+	$75,000	$75,000	-		=	$75,000	$75,000	OA
4	($30,000)	+		-		=		+	($30,000)		$30,000	($30,000)	($30,000)	OA
5		+		-	$7,750	=		+	($7,750)		-	$7,750	=	($7,750)
Bal.	$65,000	+	$35,000	-	$7,750	=	$55,000	+	$37,250	$75,000	$37,750	$37,250	$65,000
Sollution b
Depreciation expense = (Cost - Salvage value) ÷ Useful life
Depreciation expense = ($35000-$4000)/4
Depreciation expense = $7750
Sollution c
Accumulated depreciation is 2018 $7750
Accumulated depreciation is 2019 ( $7750+$7750)=$15500