The following events apply to The Ice Cream Parlor for the 2014 fiscal year: 1. The company
Question:
The following events apply to The Ice Cream Parlor for the 2014 fiscal year:
1. The company started when it acquired $16,000 cash from the issue of common stock.
2. Purchased a new ice cream machine that cost $13,300 cash.
3 .Earned $21,500 in cash revenue.
4. Paid $11,800 cash for salaries expense.
5. Paid $4,600 cash for operating expenses.
6. Adjusted the records to reflect the use of the ice cream machine.
The machine, purchased on January 1, 2014, has an expected useful life of five years and an estimated salvage value of $2,100. Use straight-line depreciation. The adjusting entry was made as of December 31, 2014.
Required:
a. Record the above transactions in a horizontal statements model . In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA) and net change in cash (NC).
b. What amount of depreciation expense would The Ice Cream Parlor report on the 2014 income statement?
c. What amount of accumulated depreciation would The Ice Cream Parlor report on the December 31, 2014, balance sheet?
d. Would the cash flow from operating activities be affected by the depreciation in 2014?
Expert Answer:
