Question
Identifying the effect of product versus selling, general, and administrative cost on the income statement Each of the following events describes acquiring an asset that
Identifying the effect of product versus selling, general, and administrative cost on the income statement
Each of the following events describes acquiring an asset that requires a year-end adjusting entry. |
1. | Paid $27,000 cash on January 1 to purchase computer equipment to be used for administrative purposes. The equipment had an estimated expected useful life of five years and a $2,000 salvage value. |
2. | Paid $27,000 cash on January 1 to purchase manufacturing equipment. The equipment had an estimated expected useful life of five years and a $2,000 salvage value. |
3. | Paid $12,000 cash in advance on May 1 for a one-year rental contract on administrative offices. |
4. | Paid $12,000 cash in advance on May 1 for a one-year rental contract on manufacturing facilities. |
5. | Paid $2,000 cash to purchase supplies to be used by the marketing department. At the end of the year, $400 of supplies was still on hand. |
6. | Paid $2,000 cash to purchase supplies to be used in the manufacturing process. At the end of the year, $400 of supplies was still on hand. |
Required |
Show how the adjusting entry affects the amount of net income shown on the year-end financial statements. Assume a December 31 annual closing date. Also, in the Cash Flow column, indicate whether the cash flow is for operating activities (OA), investing activities (IA), or financing activities (FA). Use NA to indicate that an element was not affected by the event and enter "0" in the cell. The first event has been recorded as an example. Assume that any products that have been made have not been sold. |
Net Income | Statement of Cash Flow | |
Event No. | Amount of change | Amount of change |
1. Adj Entry | $ -5,000 | NA |
2. Adj Entry | $ | |
3. Adj Entry | $ | |
4. Adj Entry | $ | |
6. Adj Entry | $ |
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