Scott Company began operations when it acquired $40,000 cash from the issue of common stock on January

Question:

Scott Company began operations when it acquired $40,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $40,000 that had a $4,000 salvage value and an expected useful life of four years. The equipment was used to produce the following revenue stream (assume all revenue transactions are for cash). At the beginning of the fifth year, the equipment was sold for $4,500 cash. Scott uses straight-line depreciation.

Year 3 Year 2 Year 4 Year 1 Year 5 Revenue $8,500 $9,500 $10,000 $10,500 $0

Required
Prepare income statements, statements of changes in stockholders’ equity, balance sheets, and statements of cash flows for each of the five years.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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