#1. (5 points)

Show calculations that support your answers.

At the beginning of the year, Copernican Observatory bought a new digital, photographic telescope at a cost of $250,000. Transportation and installation costs to get the telescope delivered and functioning in the observatory amounted to $30,000. The equipments estimated useful life is 4 years and the salvage value is $20,000.

Using the Double Declining Balance Method, calculate the depreciation expense and book value of the telescope that would be recorded at the end of each of the 4 years of its useful life.

#2. (5 points)

Using your answer to Question #1, calculate the Gain or Loss that Copernican Observatory would report on its income statement if it sold the telescope at the end of the third year for a total price of $95,000.

Gain or Loss on sale of telescope based on Double-Declining Depreciation Method:

(15 points)

#3. Denver Corporation uses the Indirect Method to prepare its Cashflow Statement.

The 10 items in the table below belong on Denvers Cashflow Statement which follows the table.

First write the item and its dollar amount under the activity it correctly belongs under (Operating, Investing or Financing) on the Cashflow Statement.

Next, for each item, identify whether it is a cash Inflow (or positive adjustment to Net Income in the Operating Section) by leaving the dollar amounts positive. If the item is a cash Outflow (or a negative adjustment to Net Income in the Operating Section), make the numbers negative by adding ( ) parenthesis around them.

Also calculate the total dollar amount for each of the three activities - being careful to use parenthesis if the total is negative.

Cashflow Items Amount

Decrease in Accounts Receivable	$20,000
Annual Depreciation Expense	200,000
Paid back Long Term Loan Principle	250,000
Proceeds from Sale of Property, Plant & Equipment	110,000
Proceeds from Acquiring Short Term Loan	300,000
Increase in Accounts Payable	50,000
Dividend Paid on Common Stock	300,000
Proceeds from sale of investments	80,000
Purchase of Treasury Stock	750,000
Increase in Inventory	145,000

Denver Corporation

Statement of Cashflows

For the Year Ended Dec. 31, 2017

Cash flows from Operating Activities:

Net Income $ 2,185,000

____________

Net Cash provided by Operating Activities $

Cash flows from Investing Activities:

____________

Net Cash from Investing Activities $

Cash flows from Financing Activities:

____________

Net Cash provided by Financing Activities $

Total Net Increase in Cash $ 1,500,000