Question

On January 1, Year 2, Shapiro Company paid $70,000 cash to purchase a truck. The truck has a $10,000 salvage value and a five-year useful life. Assume that Shapiro earns $18,000 of cash revenue per year for Year 1 through Year 5 of the assets useful life. Shapiro began Year 2 with a beginning cash balance of $110,000. Required a. Determine the amount of net income for Year 2, Year 3, and Year 4. b. Determine the amount of accumulated depreciation appearing on the Year 2, Year 3, and Year 4 balance sheet. c. Determine the book value of the truck as of December 31, Year 2, Year 3, and Year 4 d. Determine the cash flows shown on the statement of cash flows for Year 2, Year 3, and Year 4. For each cash flow item, indicate whether it is a cash inflow or cash outflow and whether the item would be shown in the financing, investing, or operating sections of the cash flow statement. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine the amount of net income for Year 2, Year 3, and Year 4 SHAPIRO COMPANY Income Statement For the Period Ended December 31 Year 2 Year 3 Year 4 0 S 0 S $ 0 Required B>

Answer 1

Page o n the using Straight line method Annual Depreciation - Cost - salwage value useful life Annual Depreciation = $70000 - $10000 = $12000 a Amount of Net Income for year 2 years, and year 4 T SHAPIRO COMPANY Income statement for the period ended December 31 - Revenue Less: Depreciation Net Income Year 2 $ 18000 $ 12000 $ 6000 $ & $ Year 3 18000 12000 6000 Year 4. $ 18000 & 12000 $ 6000 on the b) - Amount year 2 of accumulated year 3 and depreciation appearing year 4 Balance sheet. Year 2 3 Depreciation . $ 12000 $ 12000 $ 12000 Accumulated Deprecation $12000 $ 24000 & 36000

To Book year 3 of value and the truck year 4 as of December 31, year 2 Book value = cost of Aftet - Acumulated Deprecatia Year cost of Affet (B) Accumulated Depreciation red $ 12000 $ 24000 $ 3.000 Book Value (B-C) $ 58000 $ 46000 $ 34000 $ 70000 $ 70000 $ 70000 - flow Stakim December 31 Year 3 $58000 Year y $76000 $18000 18000 Cashflows on Statement of cash SHAPIRO COMPANY Statement of cash flows I for the year ended Year 2 Opening Balance $110000 Cash flows from operating activities: Revenue - In flow $ 18000 Net cash flow from Operating activity $ 18000 Cash flow for investing octivities : Purchase of Truck-Outflow & 70000) Net cash flow from Investing (670000) Activities Net cash flow from Ananing Activities Ending Cash Balance $58000 $18000 $18000 $76000 $94000