On January 1, Year 1, Your Ride Inc. paid $36,000 cash to purchase a taxi cab. The taxi had a four-year useful life and a $4,000 salvage value.

Required:
a. Determine the amount of depreciation expense that would appear on the Year 1 and Year 2 income statements.
b. Determine the amount of accumulated depreciation that would appear on the Year 1 and Year 2 balance sheets.
c. Explain how the purchase of equipment would affect the Year 1 and Year 2 statements of cash flows.