On December 31,Year 1,a restaurant purchased a $19,000 truck to be used for catering.It made a down payment of one-fourth of the purchase price.Which of the following combinations of amounts would affect the Year 1 income statement and statement of cash flows for the purchase of the truck?

Question

Quizplus · Accepted Answer

The purchase of a truck is a capital expenditure, so the full purchase price affects the statement of cash flows, but only the down payment is an outflow in the year of purchase. The income statement is not affected by the purchase price but by depreciation expense, which is not mentioned here. Therefore, the correct answer is the one that shows the down payment affecting the statement of cash flows and no immediate effect on the income statement.

On December 31,Year 1,a Restaurant Purchased a $19,000 Truck to Be