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On January 1, Year 2, LCJ Rental Cars purchased a car that is to be used to produce rental income. The car cost $35,000. It has an expected useful life of five years and a $5,000 salvage value. The car produced rental income of $9,000 per year throughout its useful life. Assume LCJ started the Year 2 accounting period with a beginning cash balance of $40,000.
Required:

a-1. Prepare an income statement and a statement of cash flows for Year 2.

a-2. Prepare an income statement and a statement of cash flows for Year 3.

a-3. Prepare an income statement and a statement of cash flows for Year 4.

b. Determine the book value of the car for Year 2, Year 3, and Year 4.

Sagot :

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