Assume that in January 2010, an Oatmeal House restaurant purchased a building, paying
$56,000 cash and signing a $107,000 note payable. The restaurant paid another $61,000 to
remodel the building. Furniture and fixtures cost $53,000, and dishes and supplies?a current
asset?were obtained for $9,200.
Oatmeal House is depreciating the building over 20 years by the straight line method, with
estimated residual value of $55,000. 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
$1,700.
Requirements
1. Journalize the purchase of the building and the purchase of the furniture and fixtures.
2. Make an adjusting entry for dishes and supplies.
3. Show what the restaurant will report for supplies, PPE, and cash flows at the end of
the first year on its:
Income statement
Balance sheet
Statement of cash flows (investing only)
Note: The purchase of dishes and supplies is an operating cash flow because supplies are a
current asset.
Thanks