Question 5

Certossi Service Ltd. uses straight-line depreciation. The company's fiscal year end is December 31. The following transactions and events occurred during their first three years of operations:

2014 Jul 1 Purchased equipment for $32,000 cash, with shipping costs of $2,000.

Nov 3 Incurred ordinary repairs on the computer of $360.

Dec 31 Recorded 2014 depreciation on the basis of a four-year life and estimated residual value of $200.

2015 Dec 31 Recorded 2015 depreciation.

2016 Jan 1 Paid $1,600 for a major upgrade of the equipment. This expenditure is expected to increase the operating efficiency and capacity of the equipment.

Instructions

Prepare journal entries to record the above events. (Show calculations.)

Question 6

Comparative statements of financial position for Campbell Inc. appear below:

CAMPBELL INC.

Comparative Statements of Financial Position

Assets

Dec. 31, 2016 Dec. 31, 2015

Cash $ 29,000 $15,000

Accounts receivable 28,000 19,000

Prepaid expenses 9,000 12,000

Merchandise inventory 37,000 27,000

Long-term investments 35,000 53,000

Equipment 75,000 48,000

Accumulated depreciationequipment (26,000) (22,000)

Total assets $187,000 $152,000

Liabilities and Shareholders' Equity

Accounts payable $ 21,000 $ 9,000

Mortgage payable 37,000 45,000

Common shares 40,000 23,000

Retained earnings 89,000 75,000

Total liabilities and shareholders' equity $187,000 $152,000

Additional information regarding fiscal 2016:

1. Profit for the year was $27,000.

2. Cash dividends of $13,000 were declared and paid during the year.

3. Long-term investments with a carrying amount of $53,000 were sold for $48,000 cash.

Instructions

Using the indirect method, prepare a statement of cash flows for the year ended December 31, 2016.