EXERCISE 8-7A

Exercise 8-7A Effect of depreciation on the accounting equation and financial statements The following events apply to Gulf Seafood for the Year 1 fiscal year: 1. The company started when it acquired $60,000 cash by issuing common stock. 2. Purchased a new cooktop that cost $40,000 cash. 3. Earned $72,000 in cash revenue. 4. Paid $25,000 cash for salaries expense. 5. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, Year 1, the cooktop 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 previous tranese 188 in a horizontal statements model like the following one. b. What amount of depreciation expense would Gulf Seafood report on the Year 1 income statement? c. What amount of accumulated depreciation would Gulf Seafood report on the December 31, Year 2 , balance sheet? d. Would the cash flow from operating activities be affected by depreciation in Year 1 ? Exercise 8-7A Effect of depreciation on the accounting equation and financial statements The following cvents apply to Gulf Seafood for the Year 1 fiscal year: 1. The company started when it acquired $60,000 cash by issuing common stock. 2. Purchased a new cooktop that cost $40,000 cash. 3. Earned $72,000 in cash revenue. 4. Paid $25,000 cash for salaries expense. 5. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, Year 1, the cooktop has an expected useful life of four years and an estimated salvage value of $4,000. Use straightline depreciation. The adjustment was made as of December 3I, Year I. Required a. Record the previous transactions in a horimntal satemenis modef ilis the following one. b. What amount of depreciation expense would Gulf Scafood report on the Year 1 income statement? c. What amount of accumulated depreciation would Gulf Seafood report on the December 31 . Year 2 , balance sheet? d. Would the cash flow from operating activities be affected by depreciation in Year I? Exercise 8-7A Effect of depreciation on the accounting equation and financial statements The following events apply to Gulf Seafood for the Year I fiscal year: 1. The company started when it acquired $60,000 cash by issuing common stock. 2. Purchased a new cooktop that cost $40,000 cash. 3. Earned $72,000 in cash revenue. 4. Paid $25,000 cash for salaries expense. 5. Adjusted the records to reflect the use of the cooktop. Purchased on January I. Year I, the cooktop has an expected useful life of four years and an estimated salvage value of $4,000. Use straightline depreciation. The adjustment was made as of December 31. Year I. Required a. Record the previous transactions in a horizontal statements model like the following one. b. What amount of depreciation expense would Gulf Seafood report on the Year I income statement? c. What amount of accumulated depreciation would Gulf Seafood report on the December 31, Year 2, balance sheet? d. Would the cash flow from operating activities be affected by depreciation in Year 1? Exercise 8-7A WJect of depreciurion an the accoantian equarion and financial Mafenents The following events apply to Ciulr Seafocd for the Year I fiscal year 1. The company staried when it acquired $60,000 cash by isuing common stock. 2. Murchased a new cooktop that coat 540,000 cash. 3. Farned $72,000 in cash revenue, 4. Paid $25,000 cash for salaries expense. 5. Adiusted the records to reflect the use of the cooktop. Purchased on January 1. Year 1, the cooktop has an expected useful life of four years and an estimated salvage value of $4,000. Use straightine depreciation. The adjustment was made as of December 31, Year I. Required a. Record the previous transactions in a horizontal statements model like the following one. b. What amount of depreciation expense would Gulf Seafood report on the Year I income statement? c. What amount of accumulated depreciation would Gulf Seafood report on the December 31, Year 2 . balance sheet? 1. Would the cash flow from operating activities be affected by depreciation in Year 1? Brerclse 7A