The following events apply to Highland Grill for the Year 1 fiscal year:

1. Started the company when it acquired $40,000 cash by issuing common stock.

2. Purchased a new stove that cost $24,000 cash.

3. Earned $21,000 in cash revenue.

4. Paid $3,500 of cash for salaries expense.

5. Adjusted the records to reflect the use of the stove. Purchased on January 1, Year 1, the stove has an expected useful life of four years and an estimated salvage value of $4,000. Use straight-line depreciation.

The adjustment was made as of December 31, Year 1.

Required

a. Record the events in accounts under an accounting equation.

b. Prepare a balance sheet and a statement of cash flows for the Year 1 accounting period.

c. What is the net income for Year 1?

d. What is the amount of depreciation expense Highland Grill would report on the Year 2 income statement?

e. What amount of accumulated depreciation would Highland Grill report on the December 31, Year 2, balance sheet?

f. Would the cash flow from operating activities be affected by depreciation in Year 2?