Question

Golden Manufacturing Company started operations by acquiring $113,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $103,000 cash, had an expected useful life of five years, and had an estimated salvage value of $10,300. Golden Manufacturing earned $96,030 and $64,380 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation.

Golden Manufacturing Company started operations by acquiring $113,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $103,000 cash, had an expected useful life of five years, and had an estimated salvage value of $10,300. Golden Manufacturing earned $96,030 and $64,380 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation.

Answer 1

Horizontal statements model Balance Sheet Income Statement Assets Equity + Equipment - Accumulated Depr = Common Stock + Retained Earnings Revenues - Expense = Net Income Statement of Cashflows Cash 113,000 + Item Year 1 Issue stock Purchase equipment Revenue Depreciation expense Balance 113,000 + (103,000) + 96,030 + 103,000 113,000 FA (103,000) IA 96,030 OA 41,200 = 41,200 = 96,030 (41,200) 54,830 96,030 41,200 = 96,030 - 41,200 = 96,030 (41,200) 54,830 106,030 + 103,000 - 113,000 + 106,030 NC 103,000 41,200 = 113,000 + Year 2 Beg Bal. Revenue Depreciation expense Balance 106,030 + 64,380 + 106,030 64,380 OA 64,380 54,830 64,380 (24,720) 94,490 24,720 = 65,920 = 24,720 = 24,720 = 64,380 (24,720) 39,660 170,410 + 103,000 - 113,000 + 64,380 - 170,410

Golden Manufacturing Company Income Statement Revenue Depreciation expense Net Income Year 1 96,030 41,200 54,830 Year 2 64,380 24,720 39,660

Golden Manufacturing Company Balance Sheet Year 1 Year 2 Assets Current Assets Cash Equipment Less: Accumulated Depreciation Total Assets 106,030 103,000 (41,200) 167,830 170,410 103,000 (65,920) 207,490 Liabilities & Stockholders Equity Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 113,000 54,830 167,830 167,830 113,000 94,490 207,490 207,490 167.830 207,490

Golden Manufacturing Company Cashflow Statement Year 1 96,030 Year 2 64,380 (103,000) Cash from Operating activities Cash revenue Cash from Investing activities Purchase of Equipment Cash from Financing activities Proceeds from issuance of common stock Net change in cash Beginning cash balance Ending cash balance 113,000 106,030 - 106,030 64,380 106,030 170,410

Double declining balance depreciaton method Double declining rate 100%/Useful Life*2 =100%/5*2 40% Years of Useful life Year 1 Year 2 Beginning book value Depreciation expense Year-end book value 103,000 41,200 61,800 61,800 24,720 37,080 Calculation Depreciation expense Year-end book value =103,000*40% =103,000-41,200 =61,800*40% =61,800-24,720