Question

Exercise 8-8A Effect of double-declining-balance depreciation on financial statements LO 8-3

Golden Manufacturing Company started operations by acquiring $127,400 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $127,400 cash, had an expected useful life of six years, and had an estimated salvage value of $25,480. Golden Manufacturing earned $93,720 and $67,170 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 Balance sheets Assets Total assets Stockholders’ equity Total stockholders’ equity Statements of cash flows Cash flows from operating activities: Cash flows from investing activities: Cash flows from financing activities: Net change in cash Ending cash balance

Answer 1

GOLDEN MANUFACTURING COMPANY
Financial Statements
	Year 1	Year 2
Income statements
Sales revenue	93720	67170
Depreciation	-42467	-28311
Net income	51253	38859
Balance sheets
Assets
Cash	93720	160890
Equipment	127400	127400
Accumulated depreciation	-42467	-70778
Total assets	178653	217512
Stockholders' equity
Common stock	127400	127400
Retained earnings	51253	90112
Total stockholders' equity	178653	217512
Statements of cash flows
Cash flows from operating activities:
Cash received from customers	93720	67170
Cash flows from investing activities:
Purchase of equipment	-127400	0
Cash flows from financing activities:
Issuance of common stock	127400	0
Net change in cash	93720	67170
Beginning cash balance	0	93720
Ending cash balance	93720	160890