Response to the following problem:
Assume the following income statement and balance sheet information:
Revenue $ 0
Depreciation expense (100)
Net loss $(100)
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2017 Dr. (Cr.)
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2016 Dr. (Cr.)
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Cash
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$350
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$650
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Machinery
|
500
|
200
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Accumulated depreciation - machinery
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(250)
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(150)
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Retained earnings
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(600)
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(700)
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No machinery was disposed during the year. All machinery purchases were paid in cash.
Required:
1. Prepare a journal entry to record the depreciation expense for the year. Determine the cash effect.
2. Prepare a journal entry to account for the change in the Machinery balance sheet account. What is the cash effect of this entry?
3. Prepare a statement of cash flows for the year ended December 31, 2017.