Question

Golden Manufacturing Company started operations by acquiring $79,800 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $79,800 cash, had an expected useful life of six years, and had an estimated salvage value of $15,960. Golden Manufacturing earned $97,270 and $63,200 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 $0 $0 Balance sheets Assets Total assets $0 $0 Stockholders’ equity Total stockholders’ equity $0 $0 Statements of cash flows Cash flows from operating activities: Cash flows from investing activities: Cash flows from financing activities: Net change in cash 0 0 Ending cash balance $0 $0

Answer 1

• Workings

A	Cost	$            79,800.00
B	Residual Value	$            15,960.00
C=A - B	Depreciable base	$            63,840.00
D	Life [in years]	6
E=C/D	Annual SLM depreciation	$            10,640.00
F=E/C	SLM Rate	16.67%
G=F x 2	DDB Rate	33.33%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$              79,800.00	33.33%	$         26,600.00	$             53,200.00	$        26,600.00
2	$              53,200.00	33.33%	$         17,733.33	$             35,466.67	$        44,333.33

• Requirement asked

GOLDEN MANUFACTURING COMPANY
Financial Statements
	Year 1	Year 2
Income statements
Revenue	$97,270	$63,200
Depreciation expense	($26,600)	($17,733)
Net Income	$70,670	$45,467
Balance sheets
Assets
Cash	$97,270	$160,470
Equipment	$79,800	$79,800
Accumulated Depreciation - Equipment	($26,600)	($44,333)
Total assets	$150,470	$195,937
Stockholders’ equity
Common Stock	$79,800	$79,800
Retained earnings	$70,670	$116,137
Total stockholders’ equity	$150,470	$195,937
Statements of cash flows
Cash flows from operating activities:
Cash received on cash revenue	$97,270	$63,200
Cash flows from investing activities:
Cash paid for equipment	($79,800)	$0
Cash flows from financing activities:
Cash received from issuance of stock	$79,800
Net change in cash	$97,270	$63,200
Beginning cash balance	$0	$97,270
Ending cash balance	$97,270	$160,470