Question 5
Certossi Service Ltd. uses straight-line depreciation. Thecompany's fiscal year end is December 31. The followingtransactions and events occurred during their first three years ofoperations:
2014 Jul 1 Purchasedequipment for $32,000 cash, with shipping costs of $2,000.
Nov 3 Incurredordinary repairs on the computer of $360.
Dec 31 Recorded 2014depreciation on the basis of a four-year life and estimatedresidual value of $200.
2015 Dec 31 Recorded 2015depreciation.
2016 Jan 1 Paid $1,600for a major upgrade of the equipment. This expenditure is expectedto increase the operating efficiency and capacity of theequipment.
Instructions
Prepare journal entries to record the above events. (Showcalculations.)
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
Accountsreceivable 28,000 19,000
Prepaidexpenses 9,000 12,000
Merchandiseinventory 37,000 27,000
Long-terminvestments 35,000 53,000
Equipment 75,000 48,000
Accumulateddepreciation—equipment (26,000) (22,000)
Totalassets $187,000 $152,000
Liabilities and Shareholders' Equity
Accountspayable $ 21,000 $9,000
Mortgagepayable 37,000 45,000
Commonshares 40,000 23,000
Retainedearnings 89,000 75,000
Total liabilities and shareholders'equity $187,000 $152,000
Additional information regarding fiscal 2016:
1. Profit forthe year was $27,000.
2. Cash dividends of$13,000 were declared and paid during the year.
3. Long-terminvestments with a carrying amount of $53,000 were sold for $48,000cash.
Instructions
Using the indirect method, prepare a statement of cash flows forthe year ended December 31, 2016.
