Effect of double-declining-balance depreciation on financial statementsSmith Company start...

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, 2012, 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 $20,000. Smith Company earned $92,000 and $65,000 of cash revenue during 2012 and 2013, respectively. Smith Company uses double-declining-balance depreciation.

Required

a. Record the above transactions in a horizontal statements model like the following one.

b.Prepare income statements, balance sheets, and statements of cash flows for 2012 and 2013. Use a vertical statements format.