Effect of double-declining-balance depreciation on financial statements
Ram Manufacturing Company started operations by acquiring $120,000 cash from the issue of common stock. On January 1, 2011, the company purchased equipment that cost $120,000 cash, had an expected useful life of six years, and had an estimated salvage value of $6,000. Ram Manufacturing earned $76,000 and $85,200 of cash revenue during 2011 and 2012, respectively. Ram Manufacturing uses double-declining-balance depreciation.
Required
Prepare income statements, balance sheets, and statements of cash flows for 2011 and 2012. Use a vertical statements format. (Hint: Record the events in T-accounts prior to preparing the statements.)
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