Effect of double-declining-balance depreciation on financial statements
Smith Company started operations by acquiring $100,000 cash from the issue of common stock. On January 1, 2011, the company purchased equipment that cost $100,000 cash. The equipment had an expected useful life of five years and an estimated salvage value of S20.000. Smith Company earned $92,000 and $65,000 of cash revenue during 2011 and 2012, respectively. Smith Company 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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