Reference no: EM132066072
Question - Listed below are a series of transactions that occurred during the first three years of operations for Jones Lawn Care, Inc.:
1. On January 1, 2013, Jones purchased two acres of land with a building to be used as a warehouse and small office space for $350,000 cash. An appraisal valued the land at $150,000 and the building at $250,000. The building has an estimated useful life of 25 years and a 25,000 salvage value.
2. On September 30, 2013, Jones purchased a Lawn Mower for $4,500. Jones also paid $500 for a one-year warranty on the mower, $750 for delivery of the mower, and $350 in sales taxes. The mower has an estimated useful life of 5 years and a salvage value of $1,000.
3. On January 1, 2014, Jones purchased a work truck in exchange for a $30,000 note payable due 6/30/15. The truck has an estimated useful life of 7 years and a salvage value of $4,000.
4. On March 1, 2014, Jones took the mower in for preseason service. The $250 charge was covered by the warranty.
5. On June 30, 2014, Jones paid $35,000 in legal costs to register a patent on a specialized piece of lawn care equipment that was developed internally.
6. On January 1, 2015, Jones paid $750 for repairs to the mower. $150 was for a tune-up and oil change. $600 was for new and improved mulching blades. The salvage value of the mower was reassessed to be $1,250 and the estimated useful life was adjusted to 7 years.
7. On September 30, 2015, Jones sold the mower for $2,250.
8. On December 31, 2015 Jones determined that changes in technology dramatically increased the value of the patent. It estimated the fair value to be $250,000.
Required:
A. Prepare the journal entries to record each of the above transactions.
B. Determine the book value of each asset at December 31, 2015. Assume Jones uses the double declining balance method to depreciate all of its assets.
C. Show what would be reported on the 2012, 2013 and 2014 statements of cash flow related to the above transactions under both the direct and indirect methods. Prepare the comparative amounts in the appropriate format.