Bensen Company began operations when it acquired $26,800 cash from the issue of common stock on...

Bensen Company began operations when it acquired $26,800 cash from the issue of common stock on January 1, 2018. The cash acquired was immediately used to purchase equipment for $26,800 that had a $4,400 salvage value and an expected useful life of four years. The equipment was used to produce the following revenue stream (assume all revenue transactions are for cash). At the beginning of the fifth year, the equipment was sold for $3,400 cash. Bensen uses straight-line depreciation. 2018 2019 2020 2021 2022 Revenue $7,470 $7,970 $8,170 $6,970 $0

Required

Prepare income statements, statements of changes in stockholders’ equity, balance sheets, and statements of cash flows for each of the five years. Present the statements in the form of a vertical statements model. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

Expert Solution

Depreciation = (Original Value - Salvage value) / Useful Life
= ($26800 - $4400) / 4 = $5600

Income Statement
	2018	2019	2020	2021	2022
Revenue	$ 7,470.00	$ 7,970.00	$ 8,170.00	$ 6,970.00
Depreciation	$ -5,600.00	$ -5,600.00	$ -5,600.00	$ -5,600.00
Gain / (Loss) on sale of asset					$ -1,000.00
Net Income / (Loss)	$ 1,870.00	$ 2,370.00	$ 2,570.00	$ 1,370.00	$ -1,000.00

Statement of Changes in Stockholders Equity

Beginning balance	$ -	$ 28,670.00	$ 31,040.00	$ 33,610.00	$ 34,980.00
Issue of Shares	$ 26,800.00
Net Income / (Loss)	$ 1,870.00	$ 2,370.00	$ 2,570.00	$ 1,370.00	$ -1,000.00
Ending Balance	$ 28,670.00	$ 31,040.00	$ 33,610.00	$ 34,980.00	$ 33,980.00

Balance Sheet
Assets
Cash	$ 7,470.00	$ 15,440.00	$ 23,610.00	$ 30,580.00	$ 33,980.00
Equipment	$ 26,800.00	$ 26,800.00	$ 26,800.00	$ 26,800.00
Less : Accumulated Depreciation	$ -5,600.00	$ -11,200.00	$ -16,800.00	$ -22,400.00
Total Assets	$ 28,670.00	$ 31,040.00	$ 33,610.00	$ 34,980.00	$ 33,980.00
Stockholders Equity
Common Stock	$ 26,800.00	$ 26,800.00	$ 26,800.00	$ 26,800.00	$ 26,800.00
Retained Earnings	$ 1,870.00	$ 4,240.00	$ 6,810.00	$ 8,180.00	$ 7,180.00
Total Stockholders Equity	$ 28,670.00	$ 31,040.00	$ 33,610.00	$ 34,980.00	$ 33,980.00

Statement of Cash Flows
Operating activities
Net Income	$ 1,870.00	$ 2,370.00	$ 2,570.00	$ 1,370.00	$ -1,000.00
Add : Depreciation	$ 5,600.00	$ 5,600.00	$ 5,600.00	$ 5,600.00	$ -
Add : Loss on sale of asset	$ -	$ -	$ -	$ -	$ 1,000.00
Net Cash Flow from Operating activities	$ 7,470.00	$ 7,970.00	$ 8,170.00	$ 6,970.00	$ -
Investing Activities
Purchase of Equipment	$ -26,800.00
Sale of Equipment					$ 3,400.00
Net Cash Investing Activities	$ -26,800.00	$ -	$ -	$ -	$ 3,400.00
Financing Activities
Issue of shares	$ 26,800.00
Net Cash flow from financing activities	$ 26,800.00	$ -	$ -	$ -	$ -
Net Change in Cash	$ 7,470.00	$ 7,970.00	$ 8,170.00	$ 6,970.00	$ 3,400.00
Beginning Balance of Cash	$ -	$ 7,470.00	$ 15,440.00	$ 23,610.00	$ 30,580.00
Ending Balance of Cash	$ 7,470.00	$ 15,440.00	$ 23,610.00	$ 30,580.00	$ 33,980.00

ekkarill92 answered 1 year ago

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