Question

The following events apply to Gulf Seafood for the 2018 fiscal year: The company started when it acquired $60,000 cash by issuing common stock. Purchased a new cooktop that cost $40,000 cash. Earned $72,000 in cash revenue. Paid $25,000 cash for salaries expense. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, 2018, the cooktop has an expected useful life of four years and an estimated salvage value of $4,000. Use straight-line depreciation. The adjusting entry was made as of December 31, 2018

Answer 1

Answer:

depreciation per year:  9,000

operating income:     41,000

Explanation:

Q: Adjusted the records to reflect the use of the cooktop.

Under straight-line the company will recognize the same amount of depreciation over the course of the assets life. At year-end the company will adjsut for the loss in value for the asset generated for the past of time.

$\frac{cost - salvage \: \:value}{useful \:\: life}$

$\frac{40,000- 4,000}{4}$

depreciation per year: 9,000

operating income:

revenues                      72,000

salaries expense:        (25,000)

depreciation per year:  (9,000)

          total                    41,000

Answer 2

The adjusting entry that was made as of December 31, 2018 was $41000.

Firstly, the depreciation per year will be calculated as follows:

= (Cost - Salvage value) / Useful life of assets

= ($40000 - $4000) / 4

= $36000/4

= $9000

Then, we will calculate the operating income which will be:

• Revenue = $72000

• Add: Depreciation = $9000

• Less: Salaries expense = ($25000)

• Operating income = $41000

Therefore, the adjusting entry that was made as of December 31, 2018 was $41000.

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