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.
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.
a. Record the purchase in a horizontal statements model.
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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
b-1. Prepare income statements for Year 1 and Year 2.
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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
b-2. Prepare balance sheets for Year 1 ...
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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
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Accounting
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