LO 3 Exercise 6-8 Effect of double-declining-balance depreciation on financial statements Smith Company started operations by acquiring $100,000 cash from the issue of common stock. On January 1, 2012, the company purchased equipment that cost $100,000 cash. The equipment had an expected useful life of five years and an estimated salvage value of $20,000. Smith Com- pany earned $92,000 and $65,000 of cash revenue during 2012 and 2013, respectively. Smith Company uses double-declining-balance depreciation. Required a. Record the above transactions in a horizontal statements model like the following one. Balance Sheet Income Statement Event Assets Equity Rev. - Statemt. of Cash Flows Exp. = Net Inc. Cash + Equip - A. Depr. = Com. Stock + Ret. Earn. b. Prepare income statements, balance sheets, and statements of cash flows for 2012 and 2013. Use a vertical statements format. LO 3, 4 Exercise 6-9 Events related to the acquisition, use, and disposal of a tangible plant asset: straight-line depreciation CJ's Pizza purchased a delivery van on January 1, 2012, for $25,000. In addition, CJ's paid sales tax and title fees of $1,000 for the van. The van is expected to have a four-year life and a salvage value of $6,000. Required a. Using the straight-line method, compute the depreciation expense for 2012 and 2013. b. Assume the truck was sold on January 1, 2015, for $12,000. Determine the amount of gain or loss that would be recognized on the asset disposal