Problem 6-30A (Algo) Purchase and use of tangible asset: Three accounting cycles, double-declining- balance depreciation LO 6-1, 6-3, 6-7 The following transactions pertain to Accounting Solutions Incorporated Assume the transactions for the purchase of the computer and any capital Improvements occur on January 1 each year. Year 1 1. Acquired $55,000 cash from the issue of common stock. 2. Purchased a computer system for $24,200. It has an estimated useful life of five years and a $3,500 salvage value. 3. Pald $1,800 sales tax on the computer system. 4. Collected $39,100 In fees from clients. 5. Pald $1,150 In fees for routine maintenance to service the computers. 6. Recorded double-declining-balance depreciation on the computer system for Year 1. Complete this question by entering your answers in the tabs below. Event Year 1 1. 2. 3. Cash Req A Year 1 Req A Year 2 Req A Year 3 Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investin financing activities (FA). Note: Enter any decreases to account balances or cash outflows with a minus sign. Leave cells blank if no input is needed. Assets 55,000 (24.200) + (1.800) + 4. 39.100 + 5. 6. (1.150) + 0+ 66,950 + Balance NC Net change in cash Balance Sheet Book Value of Equipment 0 = 24,200 = 1,800 = 0 = 0 = Req B1 Income Statement 26,000 = Req B2 Statement of Changes ACCOUNTING SOLUTIONS INCORPORATED Horizontal Statements Model - Year 1 Stockholders' Equity Retained Earnings Common Stock 55,000 + 0+ ol+ 0+ 0+ 0+ 55,000+ Req B3 Balance Sheet 0 0 0 39,100 (1,150) 0 37,950 Revenue 0 0 of-9 01- 39,100 0 Income Statement Req B4 Statement of Cash Flows 0- F 39,100- Expenses = Net Income 0 = 0 = 0 = 0 = 1 (1.150) = 0 = (1.150) = 0 0 0 39,100 (1,150) 0 37,950 Statement of Cash Flows 55,000 FA (24,200) IA (1.800) IA 39,100 OA (1,150) OA 0 68,950 NC
Problem 6-30A (Algo) Purchase and use of tangible asset: Three accounting cycles, double-declining- balance depreciation LO 6-1, 6-3, 6-7 The following transactions pertain to Accounting Solutions Incorporated Assume the transactions for the purchase of the computer and any capital Improvements occur on January 1 each year. Year 1 1. Acquired $55,000 cash from the issue of common stock. 2. Purchased a computer system for $24,200. It has an estimated useful life of five years and a $3,500 salvage value. 3. Pald $1,800 sales tax on the computer system. 4. Collected $39,100 In fees from clients. 5. Pald $1,150 In fees for routine maintenance to service the computers. 6. Recorded double-declining-balance depreciation on the computer system for Year 1. Complete this question by entering your answers in the tabs below. Event Year 1 1. 2. 3. Cash Req A Year 1 Req A Year 2 Req A Year 3 Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investin financing activities (FA). Note: Enter any decreases to account balances or cash outflows with a minus sign. Leave cells blank if no input is needed. Assets 55,000 (24.200) + (1.800) + 4. 39.100 + 5. 6. (1.150) + 0+ 66,950 + Balance NC Net change in cash Balance Sheet Book Value of Equipment 0 = 24,200 = 1,800 = 0 = 0 = Req B1 Income Statement 26,000 = Req B2 Statement of Changes ACCOUNTING SOLUTIONS INCORPORATED Horizontal Statements Model - Year 1 Stockholders' Equity Retained Earnings Common Stock 55,000 + 0+ ol+ 0+ 0+ 0+ 55,000+ Req B3 Balance Sheet 0 0 0 39,100 (1,150) 0 37,950 Revenue 0 0 of-9 01- 39,100 0 Income Statement Req B4 Statement of Cash Flows 0- F 39,100- Expenses = Net Income 0 = 0 = 0 = 0 = 1 (1.150) = 0 = (1.150) = 0 0 0 39,100 (1,150) 0 37,950 Statement of Cash Flows 55,000 FA (24,200) IA (1.800) IA 39,100 OA (1,150) OA 0 68,950 NC
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 75APSA
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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