50.1K

Verified Solution

Link Copied!

Required information

E8-5 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight-Line Depreciation) LO8-2, 8-3

Skip to question

[The following information applies to the questions displayed below.]

Steves Outdoor Company purchased a new delivery van on January 1 for $49,000 plus $4,200 in sales tax. The company paid $13,200 cash on the van (including the sales tax), signing an 7 percent note for the $40,000 balance due in nine months (on September 30). On January 2, the company paid cash of $700 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steves Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,900.

Required: 1. Indicate the effects of each transaction on the accounting equation. (Enter decreases to account categories as negative amou If the transaction does not impact the accounting equation choose "No effect" in the first column under "Assets".) Assets Answer is complete but not entirely correct. Liabilities Short term note payable 40,000 Date January 1 Stoc Equipment (Van) Cash Equipment (Van) Cash January 2 53,200 (13,200) 700 (600) 42,100 September 30 Cash Short term note payable (40,000) Interest expense n. (Enter decreases to account categories as negative amounts. e "No effect" in the first column under "Assets") Answer is complete but not entirely correct. Liabilities t term note payable 40,000 Stockholders' Equity 4 term note payable (40,000) Interest expense 2,100

Answer & Explanation Solved by verified expert

See Answer