Assume that on January 1, 2016, Monster Steakhouse restaurant purchased a buildi
ID: 2509926 • Letter: A
Question
Assume that on January 1, 2016, Monster Steakhouse restaurant purchased a building, paying $57,000 cash and signing a $102,000 note payable. The restaurant paid another $63,000 to remodel the building. Furniture and fixtures cost $51,000, and dishes and supplies-a current asset-were obtained for $9,600. All expenditures were for cash. Assume that all of these expenditures occurred on January 1, 2016. Monster Steakhouse is depreciating the building over 25 years by the straight-line method, with estimated residual value of $56,000. The furniture and fixtures will be replaced at the end of five years and are being depreciated by the double-declining-balance method, with zero residual value. At the end of the first year, the restaurant still has dishes and supplies worth $1,400. Read the requirements Requirement 1. Show what the restaurant will report for supplies, plant assets, and cash flows at the end of the first year on its income statement, balance sheet, and statement of cash flows. Begin with the income statement. Income Statement Expenses: Now show what the restaurant will report on its balance sheet Balance Sheet Current assets: Plant assets: Less: Choose from any list or enter any number in the input fields and then continue to the next question.Explanation / Answer
Answer
Building
222000
Residual Value
-56000
Depreciable base
$166000
Life [in years]
25
Annual depreciation
$6,640
Furniture and Fixtures
51000
Life [in years]
5
Annual Depreciation as per SLM
10200
SLM Rate [10200/51000]
20%
DDB Rate [20% x 2]
40%
2016 Depreciation expense [51000 x 40%]
$20,400
Dishes and Supplies on 1 Jan 2016
9600
(-) Dishes and Supplies on 31 Dec 2016
1400
Dishes and Supplies used
$8,200
Expenses:
Depreciation expenses-Building
$6640
Depreciation expenses-Furniture & Fixtures
$20400
Dishes and Supplies expenses
$8200
Current Assets:
Dishes & Supplies
$1,400
Plant Assets:
Building
222000
Less: Accumulated Depreciation-Building
6640
$215,360
Furniture & Fixtures
51000
Less: Accumulated Depreciation-Furniture and Fixtures
20400
$30,600
Purchase of Building
-222000
Purchase of Furniture & Fixtures
-51000
Cash Flows from Investing Activities
-273000
Building
222000
Residual Value
-56000
Depreciable base
$166000
Life [in years]
25
Annual depreciation
$6,640
Furniture and Fixtures
51000
Life [in years]
5
Annual Depreciation as per SLM
10200
SLM Rate [10200/51000]
20%
DDB Rate [20% x 2]
40%
2016 Depreciation expense [51000 x 40%]
$20,400
Dishes and Supplies on 1 Jan 2016
9600
(-) Dishes and Supplies on 31 Dec 2016
1400
Dishes and Supplies used
$8,200