Question

At the beginning of Year 1, Copland Drugstore purchased a new computer system for 85,000. It is expected to have a five-year life and a $15,000 salvage value. Exercise 8-9A Part b b. Record the purchase of the computer system and the depreciation expense for the first year under straight-line and double-declining-balance methods in a financial statements model like the following one: (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity and NA to indicate the element is not affected by the event. Enter any decreases to account balances with a minus sign.)

Answer 1

Event	Assets	=	Liabilities	+	Stockholder's Equity		Cash Flow Statements
											Retained earnings
	Cash	+	Equipment	-	Accum. Depr.-Equip	=		+	Common stock	+	Revenues	-	Expenses	-	Dividend
Purchase	-$85,000	+	$85,000	-	$0	=	$0	+	$0	+	$0	-	$0	-	0		Investing Activities		-$85,000
SL Depreciation	$0	+	$0	-	$14,000	=	$0	+	$0	+	$0	-	$14,000	-	0		Operating Activities	$14,000
DDB Depreciation	$0	+	$0	-	$34,000	=	$0	+	$0	+	$0	-	$34,000	-	0		Operating Activities	$34,000