Sweets Inc. made several capital purchases during the last month of the year. As part of the purchases the company sold some existing fixed assets. Yesterday, as you were walking to the company cafeteria, you saw the President of Sweets Inc. While walking with the President you mentioned that recent capital purchases would significantly impact the financial statements. Today, the President called you directly and asked you to write a memorandum explaining the impact of the capital purchases (and related sale of some existing fixed assets) on each of the following financial statements; Income Statement Balance Sheet Statement of Cash Flows Summary of December Capital Transactions On Dec. 1, 2021 Sweets Inc. purchased a new delivery truck for $ 100,000 The following additional information was provided: The truck was paid for with cash. The truck is expected to have a service life of 10 years. No salvage value is expected after the service life. The company uses straight-line depreciation for their financial reporting. On Dec. 1, 2021 Sweets Inc. purchased equipment for new production line at the lowa Plant. The cost of the equipment was $ 1,500,000 The following additional information was provided: The equipment was paid for with cash. The equipment has an expected service life of 20 years. Salvage value at the end of the service life is estimated to be $ 150,000 The company uses straight-line depreciation for their financial reporting. The equipment was installed in December 15, 2021. The installation cost was Trial runs were also completed on December 15, 2021. The cost of the trial run was $ 50,000 $ 10,000 On Dec. 31, 2021 Sweets Inc. sold an old delivery truck to a local farmer for $ 5,000 The following additional information was provided: The farmer paid Sweets Inc the full amount in cash on December 31. The old delivery truck was on the books as follows: Equipment - Delivery Truck $ 50,000 Accumulated Depreciation - Equipment - Delivery Truck $ 50,000 On Dec. 31, 2021 Sweets Inc. sold production equipment to a small candy manufacturer in Vermont for $ 40,000 The following additional information was provided: The small candy manufacturer offered a note in payment. The note is an agreement to pay Sweets Inc. Sweets Inc $ 50,000 on June 30, 2022. The production equipment was on the books as follows: Equipment $ 200,000 Accumulated Depreciation - Equipment $ 185,000 Instructor Note: Make sure you prepare the necessary joumal entry(s) for each of the four transactions. The President is not an accountant. Your memorandum needs to walk the President from the accounting detail to the big picture. Sweets Inc. made several capital purchases during the last month of the year. As part of the purchases the company sold some existing fixed assets. Yesterday, as you were walking to the company cafeteria, you saw the President of Sweets Inc. While walking with the President you mentioned that recent capital purchases would significantly impact the financial statements. Today, the President called you directly and asked you to write a memorandum explaining the impact of the capital purchases (and related sale of some existing fixed assets) on each of the following financial statements; Income Statement Balance Sheet Statement of Cash Flows
