Golden Manufacturing Company started operations by acquiring $128,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $118,000 cash, had an expected useful life of five years, and had an estimated salvage value of $11,800. Golden Manufacturing earned $94,010 and $65,940 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Golden Manufacturing Company started operations by acquiring $128,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $118,000 cash, had an expected useful life of five years, and had an estimated salvage value of $11,800. Golden Manufacturing earned $94,010 and $65,940 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance
Required
a. Record the transactions 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.
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