Question

Need help figuring out the Depreciation Expense amount for year 1 and 2

Golden Manufacturing Company started operations by acquiring $115,200 cash from the issue of common stock. On January 1, Year 1. the company purchased equipment that cost $115,200 cash, had an expected useful life of six years, and had an estimated salvage value of $23,040. Golden Manufacturing earned $86,530 and $61,420 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation. Required: Prepare income statements, balance sheets, and statements of cash flows for Year 1 and Year 2. Use a vertical statements format. (Hint: Record the events in T-accounts prior to preparing the statements.) (Do not round Intermediate calculations. Round your final answers to the nearest whole dollar. Amounts to be deducted and net loss should be indicated with a minus sign.) GOLDEN MANUFACTURING COMPANY Financial Statements Year 1 Year 2 Income statements Sales revenue 86,530 $ 61,420 Depreciation expense Net Income $ 86,530 $ 61,420 Balance sheets Assets Cash $ 86,530 $ 147,950 Equipment 115.2007 115200 Accumulated depreciation (38.400)| (64,000) $ 163,330 $ 199,150 Total assets Stockholders' equity Common stock $ 115,200 $ 115200

Answer 1

Computation of the depreciation expense to be recognized under the 200 percent declining-balance method :-
						Double (200%) Declining Balance Method of Depreciation
Double Declining Balance Depreciation		=	2 × Straight line Depreciation rate × Book value at the beginning of the year
	Cost		=	$                                        115,200
	Salvage value		=	$                                          23,040
	Useful life		=	6
	Straight line Depreciation Rate		=	100
				6
			=	16.67%
	Double (200%) Declining Balance Depreciation Rate		=	2 * 16.67%= 33.33%

Year	Depreciation for the period				End of Period
	Beginning of Period Book Value	Depreciation Rate		Depreciation Expense	Accumulated Depreciation	Book Value
a	b		c	d = b*c	e	f = b-d
Year 1	115,200	33.33%		$                                          38,400	$                          38,400	$                     76,800
Year 2	76,800	33.33%		$                                          25,600	$                          64,000	$                     51,200

	Depreciation Expense
Year 1	$                                             38,400
Year 2	$                                             25,600

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