In January 2017, suppose a Starbucks franchise in Regina purchased a building, paying $50,000 cash and signing a $100,
In January 2017, suppose a Starbucks franchise in Regina purchased a building, paying $50,000 cash and signing a $100,000 note payable. The franchise paid another $50,000 to remodel the facility. Equipment and store fixtures cost $50,000; dishes and supplies-a current asset-were obtained for $10,000.
The franchise is depreciating the building over 25 years by the straight-line method, with estimated residual value of $50,000. The equipment and store fixtures will be replaced at the end of five years; these assets are being depreciated by the double-diminishing-balance method, with zero residual value. At the end of the first year, the franchise has dishes and supplies worth $2,000.
Show what the franchise will report for supplies, property, plant, and equipment and cash flows at the end of the first year on its:
â€¢ Income statement
â€¢ Balance sheet
â€¢ Statement of cash flows (investing only)
Show all computations. (Note: The purchase of dishes and supplies is an operating cash flow because supplies are a current asset.)