### Depreciation Impact on Financial Statements**Scenario:**On January 1, Year 1, Marino Moving Company paid $144,000 cash to purchase a truck. The truck was anticipated to have a four-year useful life and a $24,000 salvage value. Marino uses the double-declining-balance method for depreciation. The task is to identify how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the company's financial statements.**Financial Statement Analysis:**#### Balance Sheet and Income Statement Overview:| | Balance Sheet | Income Statement | Cash Flow ||-----------------------------------|----------------------------------------------------------------|------------------------------------------------------------|------------------------------|| | Assets | | || | Cash + Truck - Accumulated Depreciation = Liabilities + Equity | Revenue - Expenses = Net Income | Statement || A. | NA + NA - $12,000 = NA + $(12,000) | NA - $12,000 = $(12,000) | NA || B. | NA + NA - $12,000 = NA + $(12,000) | NA - $12,000 = $(12,000) | $(12,000) OA || C. | NA + NA - $18,000 = NA + $(18,000) | NA - $18,000 = $(18,000) | NA || D. | NA + NA - $18,000 = NA + $(18,000) | NA - $18,000 = $(18,000) | $(18,000) OA |#### Options Explanation:- **Option A:** Recognizes a $12,000 depreciation expense affecting net income, but shows no cash flow impact.- **Option B:** Similar to Option A, but includes an operational cash flow impact of $(12,000) OA.- **Option C:** Recognizes an $18,000 depreciation expense affecting net income, with no cash flow impact.- **Option D:** Similar to Option C, but includes an operational cash flow impact of $(18,000) OA.#### Multiple Choice:- **Option A**- **Option B**- **Option C**- **Option D**This multiple-choice question requires selecting the correct financial representation when utilizing the double-declining

On January 1, Year 1, Marino Moving Company paid $144,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $24,000 salvage value. If Marino uses the double-declining-balance method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the company's financial statements? A. B. C. D. Cash + ΝΑ + ΝΑ ΝΑ ΝΑ + + + O Multiple Choice Assets Truck ΝΑ ΝΑ ΝΑ ΝΑ Option A Option B Option C Option D - Balance Sheet Accumulated Depreciation $12,000 $12,000 $18,000 $18,000 = = Liabilities + Equity + $(12,000) + $(12,000) + $(18,000) + $(18,000) ΝΑ ΝΑ ΝΑ NA Revenue ΝΑ ΝΑ NA NA Income Statement Cash Flow Statement Expenses Net Income $12,000 $(12,000) ΝΑ $12,000 = $(12,000) $(12,000) OA $18,000 $18,000 $(18,000) ΝΑ $(18,000) $(18,000) OA = =

On January 1, Year 1, Marino Moving Company paid $144,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $24,000 salvage value. If Marino uses the double-declining-balance method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the company's financial statements? A. B. C. D. Cash + ΝΑ + ΝΑ ΝΑ ΝΑ + + + O Multiple Choice Assets Truck ΝΑ ΝΑ ΝΑ ΝΑ Option A Option B Option C Option D - Balance Sheet Accumulated Depreciation $12,000 $12,000 $18,000 $18,000 = = Liabilities + Equity + $(12,000) + $(12,000) + $(18,000) + $(18,000) ΝΑ ΝΑ ΝΑ NA Revenue ΝΑ ΝΑ NA NA Income Statement Cash Flow Statement Expenses Net Income $12,000 $(12,000) ΝΑ $12,000 = $(12,000) $(12,000) OA $18,000 $18,000 $(18,000) ΝΑ $(18,000) $(18,000) OA = =

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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