Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an…

Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2016, and it will be ready for use on September 1, 2016.  Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation.

Natalie and her friend Curtis Lesperance decide that they can benefit from joining Cookie Creations and Curtis’s coffee shop. They want your help in preparing financial information following the first year of operations of their new business, Cookie & Coffee Creations.

Curtis and Natalie then meet with a lawyer and form a corporation on November 1, 2016, called Cookie & Coffee Creations Inc. The articles of incorporation state that there will be two classes of shares that the corporation is authorized to issue: common shares and preferred shares. They authorize 100,000 shares of $.01 par value common stock, and 10,000 shares of $.01 par value preferred stock.

Cookie & Coffee Creations then has the following selected transactions:

Dec      1     Issues an additional 1,000 preferred shares to Natalie’s brother for $3,000.

Dec   30     Repurchases 1,000 shares of common stock issued to the lawyer, for $500.

Dec   31     Records income tax expense. (The company has a 35% income tax rate.)

Dec    31     Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on Jan 1.