menu
bartleby
search
close search
Hit Return to see all results

Golden Manufacturing Company started operations by acquiring $150,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $120,000 cash, had an expected useful life of six years, and had an estimated salvage value of $4,000. Golden Manufacturing earned $72,000 and $83,000 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation. Requireda. Record the purchase in a horizontal statements model.b-1. Prepare income statements for Year 1 and Year 2.b-2. Prepare balance sheets for Year 1 and Year 2.b-3. Prepare statements of cash flows for Year 1 and Year 2.

Question

Golden Manufacturing Company started operations by acquiring $150,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $120,000 cash, had an expected useful life of six years, and had an estimated salvage value of $4,000. Golden Manufacturing earned $72,000 and $83,000 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation.
 
Required
a. Record the purchase in a horizontal statements model.
b-1. Prepare income statements for Year 1 and Year 2.
b-2. Prepare balance sheets for Year 1 and Year 2.
b-3. Prepare statements of cash flows for Year 1 and Year 2.

check_circleAnswer
Step 1

a. Record the purchase in a horizontal statements model.

 

 

 

 

HORIZONTAL STATEMENT MODEL
GOLDEN MANUFACTURING COMPANY
Accumulated
Statement of cash flows
+Equipment
Common stock+Retained earnings Revenue Expense Net income
Event
Cash
depreciation
Year 1:
$150,000 +
$150,000 +
$150,000 Financing Activity
($120,000) Investing Activity
$72,000 Operating Activity
Issue common stock
(S120,000)-
$72,000
$120,000
Purchase equipment
$72,000
($40,000)
$72,000
$72.000
Revenue
S40.000
Depreciation expense
Ending Balance
(S40,000)
$40,000
NA
$102,000 +
$150,000
$102,000 Net change in cash
$120,000
$40,000
$32,000
$72,000
$40,000
$32,000
Year 2:
$102,000 +
Beginning balance
$150,000+
$120,000
$40.000
$32,000
$83,000 +
$83,000 Operating Activity
$83.000
$83.000
Revenue
S83.000
NA
$26.667
$26.667)
$26.667
($26,667)
Depreciation expense
$185.000+
$150,000 +
$83.000
$83,000 Net change in cash
Total
$120,000
$66.667
$88,333
$26,667
$56,333
Working note:
$120,000
Cost
Less: Depreciation
expense for 2018
($120,000(1/3)
Opening Book value as
$40,000
$80,000
on 2019
preciation
expense for 2019
($120,000 (1/3)
$26,667
Opening Book value as
on 2020
$53,333
help_outline

Image Transcriptionclose

HORIZONTAL STATEMENT MODEL GOLDEN MANUFACTURING COMPANY Accumulated Statement of cash flows +Equipment Common stock+Retained earnings Revenue Expense Net income Event Cash depreciation Year 1: $150,000 + $150,000 + $150,000 Financing Activity ($120,000) Investing Activity $72,000 Operating Activity Issue common stock (S120,000)- $72,000 $120,000 Purchase equipment $72,000 ($40,000) $72,000 $72.000 Revenue S40.000 Depreciation expense Ending Balance (S40,000) $40,000 NA $102,000 + $150,000 $102,000 Net change in cash $120,000 $40,000 $32,000 $72,000 $40,000 $32,000 Year 2: $102,000 + Beginning balance $150,000+ $120,000 $40.000 $32,000 $83,000 + $83,000 Operating Activity $83.000 $83.000 Revenue S83.000 NA $26.667 $26.667) $26.667 ($26,667) Depreciation expense $185.000+ $150,000 + $83.000 $83,000 Net change in cash Total $120,000 $66.667 $88,333 $26,667 $56,333 Working note: $120,000 Cost Less: Depreciation expense for 2018 ($120,000(1/3) Opening Book value as $40,000 $80,000 on 2019 preciation expense for 2019 ($120,000 (1/3) $26,667 Opening Book value as on 2020 $53,333

fullscreen
Step 2

b-1. Prepare income statements for Year 1 and Year 2.

 

INCOME STATEMENT
Year 1
Year 2
Particualrs
Amount
$72,000 $83,000
Revenue
$40,000
Less: Depreciation expense
26,667
$32,000 $56,333
Net income
help_outline

Image Transcriptionclose

INCOME STATEMENT Year 1 Year 2 Particualrs Amount $72,000 $83,000 Revenue $40,000 Less: Depreciation expense 26,667 $32,000 $56,333 Net income

fullscreen
Step 3

b-2. Prepare balance sheets for Year 1 ...

BALANCE SHEET
Year 1
Year 2
Particualrs
Amount
Assets:
$102,000 $185,000
$120,000 $120,000
$40,000 $66,667
$182,000 $238,333
Cash
Equipment
Less: Accumulated depreciation
Total Assets
Liabilities:
$0
$0
Liabilites
Stockholders' equity:
Common stock
retained earnings
Total stockholders' equity
Total liabilites and stockholders' equity
$150,000 $150,000
$32,000 $88,333
$182,000 $238,333
$182,000 $238,33
help_outline

Image Transcriptionclose

BALANCE SHEET Year 1 Year 2 Particualrs Amount Assets: $102,000 $185,000 $120,000 $120,000 $40,000 $66,667 $182,000 $238,333 Cash Equipment Less: Accumulated depreciation Total Assets Liabilities: $0 $0 Liabilites Stockholders' equity: Common stock retained earnings Total stockholders' equity Total liabilites and stockholders' equity $150,000 $150,000 $32,000 $88,333 $182,000 $238,333 $182,000 $238,33

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Problem 11-2A (Part Level Submission) The stockholders’ equity accounts of Cheyenne Corp. on Januar...

A: Calculating the value of dividends paid to common stockholder. We have,The value of dividend paid to...

question_answer

Q: Brief Exercise 21A-6 Metlock Company leased equipment from Costner Company, beginning on December 31...

A: Prepare jounal entry to record lease liability: 

question_answer

Q: Blossom Company estimates that 2020 sales will be $40000 in quarter 1, $48000 in quarter 2, and $580...

A: A merchandise purchases budget is a budgetary arrangement that reports the absolute appraisals expen...

question_answer

Q: What is the major reason for a forward stock split?

A: Stock Split: Stock Split is a scheme in which a company’s total number of shares outstanding will ei...

question_answer

Q: On May 1, 2020, Judice Company issued 400 $1,000 bonds at 104. Each bond was issued with two detacha...

A: Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lend...

question_answer

Q: HH purchased new shelving for its store on April 1, 2018. The shelving is expected to have a 20-year...

A: Since, we only answer upto 3 sub-parts, we'll answer the first 3.Please resubmit the question and sp...

question_answer

Q: Hello, (Continued from an earlier email). Silverstone's production budget for July called for making...

A: Fixed overhead volume variance: The difference between the actual fixed overhead applied to the prod...

question_answer

Q: Platt Company produces one product, a putter called PAR –putter. Platt uses a standard cost system a...

A: Compute the predetermined variable overhead rate: 

question_answer

Q: Flounder Windows manufactures and sells custom storm windows for three-season porches. Flounder also...

A: Revenue Recognition: As per the revenue recognition concept of accounting, the revenue of the busine...

Sorry about that. What wasn’t helpful?