Question

Golden Manufacturing Company started operations by acquiring $87,300 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $87,300 cash, had an expected useful life of six years, and had an estimated salvage value of $17,460. Golden Manufacturing earned $95,750 and $62,460 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.)

Answer 1

Depreciation = (Original Value - Salvage Value) / USeful life
= ($87300 - $17460) / 6 = $11640 per year

Income Statement
	Year1	Year 2
Revenue	$    95,750.00	$     62,460.00
Depreciation	$ -11,640.00	$    -11,640.00
Net Income / (Loss)	$    84,110.00	$     50,820.00

Balance Sheet
Assets
Cash	$    95,750.00	$ 1,58,210.00
Equipment	$    87,300.00	$     87,300.00
Less : Accumulated Depreciation	$ -11,640.00	$    -23,280.00
Total Assets	$ 1,71,410.00	$ 2,22,230.00
Stockholders Equity
Common Stock	$    87,300.00	$     87,300.00
Retained Earnings	$    84,110.00	$ 1,34,930.00
Total Stockholders Equity	$ 1,71,410.00	$ 2,22,230.00

Statement of Cash Flows
Operating activities
Net Income	$    84,110.00	$     50,820.00
Add : Depreciation	$    11,640.00	$     11,640.00
Add : Loss on sale of asset	$                  -	$                    -
Net Cash Flow from Operating activities	$    95,750.00	$     62,460.00
Investing Activities
Purchase of Equipment	$ -87,300.00
Sale of Equipment
Net Cash Investing Activities	$ -87,300.00	$                    -
Financing Activities
Issue of shares	$    87,300.00
Net Cash flow from financing activities	$    87,300.00	$                    -
Net Change in Cash	$    95,750.00	$     62,460.00
Beginning Balance of Cash	$                  -	$     95,750.00
Ending Balance of Cash	$    95,750.00	$ 1,58,210.00