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    Depreciation on the accounting equation and financial statements

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    The following events apply to The Pizza Factory for the 2008 fiscal year:

    1. The company started when it acquired $18,000 cash from the issue of common stock.
    2. Purchased a new pizza oven that cost $15,000 cash.
    3. Earned $26,000 in cash revenue
    4. Paid $13,000 cash for salaries expense
    5. Paid $6,000 cash for operating expenses
    6. Adjusted the records to reflect the use of the pizza oven. The oven, purchased on January 1 2008, has an expected useful life of five years and an estimated salvage value of $3,000. Use straight-line depreciation. The adjusting entry was as of December 31, 2008

    a. Record the events in general journal format and post to the T-accounts
    b. What amount of depreciation expense would The Pizza Factory report on the 2009 income statement?
    c. What amount of accumulated depreciation would The Pizza Factory report on the December 31, 2009, balance sheet?
    d. Would the cash flow from operating activites be affected by depreciation in 2009?

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    Solution Summary

    This solution answers 4 accounting questions, addressing journal format, depreciation expense, accumulated depreciation and cash flow.

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