Question

Required information [The following information applies to the questions displayed below.] The following transactions pertain to Accounting Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year. 2018 1. Acquired $60,000 cash from the issue of common stock 2. Purchased a computer system for $24,000. It has an estimated useful life of five years and a $3,230 salvage value. 3. Paid $1,300 sales tax on the computer system. 4. Collected $39.600 in fees from clients. 5. Paid $1.060 in fees for routine maintenance to service the computers. 6. Recorded double-declining-balance depreciation on the computer system for 2018. 2019 1. Paid $990 for repairs to the computer system. 2. Bought off-site backup services to maintain the computer system, $1,080. 3. Collected $42,600 in fees from clients. 4. Paid $820 in fees to service the computers. 5. Recorded double-declining-balance depreciation for 2019. 2020 1. Paid $3,100 to upgrade the computer system, which extended the total life of the system to six years. The salvage value did not change. 2. Paid $910 in fees to service the computers. 3. Collected $31,590 in fees from clients. 4. Recorded double-declining-balance depreciation for 2020.

Answer 1

a.

Accounting Solutions Inc. Horizontal Statements Model: 2018
Event 2018	Assets			=	Stockholders Equity		Income Statement			Statement of Cash Flows
	Cash	Equipment	Accumulated Depreciation		Common Stock	Retained Earnings	Revenue -	Expense =	Net Income
1	60,000				60,000					60,000	FA
2	(24,000)	24,000								(24,000)	IA
3	(1,300)	1,300								(1,300)	IA
4	39,600					39,600	39,600			39,600	OA
5	(1,060)					(1,060)		1,060		(1,060 )	OA
6			10,120			(10,120)		10,120		-	-
Bal.	73,240	25,300	(10,120)		60,000	28,420	39,600	11,180	28,420
Horizontal Statements Model:2019
2019
Bal.	73,240	25,300	(10,120)		60,000	28,420
1.	(990)					(990)		990		(990)	OA
2.	(1,080)					(1,080)		1.080		(1,080)	OA
3.	42,600					42,600	42,600			42,600	OA
4.	(820)					(820)		820		(820)	OA
5.			6,072			(6,072)		6,072		-	-
Bal.	112,950	25,300	(16,192)		60,000	62,058	42,600	8,962	33,638
Horizontal Statements Model : 2020
2020
Bal.	112,950	25,300	(16,192)		60,000	62,058
1	(3,100)	3,100								(3,100)	IA
2	(910)					(910)		910		(910)	OA
3	31,590					31,590	31,590			31,590	OA
4.			6,104			(6,104)		6,104		-	-
Bal.	140,530	28,400	(22,296)		60,000	86,634	31,590	7,014	24,576

Straight line depreciation rate = 100 / 5 = 20 %

Depreciation expense for 2018 = $ 25,300 x 20 % x 2 = $ 10,120

Depreciation expense for 2019 = $ (25,300 - 10,120) * 40 % = $ 6,072.

Depreciation expense for 2020 = [$ ( 25,300 - 16,192) + $ 3,100] x 100 / 4 * 2 = $ 6,104.