Question

Sabel Co. purchased assembly equipment for $693,000 on January 1, 2018. Sabel's financial condition immediately prior to the purchase is shown in Required B. The equipment is expected to have a useful life of 330,000 machine hours and a salvage value of $33,000. Actual machine-hour use was as follows: 2018 89,000 2019 85,000 2020 85,000 2021 49,000 2022 23,000 Required a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. b. Assume that Sabel earns $243,000 of cash revenue during 2018. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a horizontal statements model. The first event is recorded as an example. C. Assume that Sabel sold the equipment at the end of the fifth year for $34,900. Calculate the amount of gain or loss on the sale. Complete this question by entering your answers in the tabs below. Required Required Required A BC Compute the depreciation for each of the five years, assuming the use of units-of- production depreciation. (Do not round intermediate calculations.) Years Depreciatio 2018 2019 2020 2021 2022 < Required A Required B

Answer 1

Solotion : Calculation Iroduction Years 2018 of depreciation for five years under the units of depreciation Machine calculation Depreciation hours 89,000 [[ 693,000 - 33,000]* 8900/330,000 - $ 178,000 85,000 (1 693000 -33,000) x 85000/330,00] = $ 170,000 (1 693000 -33000) * 85000/330,000] = $170,000 51693000 -33,000) * 49000(330,600] = $98,000 (1693000-33000) x 23000/339cd] = $46,000 2019 2020 85,000 2021 49,000 2022 23,000 $ 662,000 Net SABEL CO. Horizontal statements model for 2018 Balance sheet Income statement Assets Stockholder's Equity Revenue - Expense - sincera cashflow Book value common Retained Event Cash & Equipment - Stock & earnings Balance 930.000 + : 930,000 + Equipment -693,000 + 693,000 -693000 243000 243,000 + - 243000 Revenue + -178,010 178000 - -178000 Depreciation Balance 65000 480,000 + 5150DD - 930,000 + 243001 - 178000

equipment sold (0) Calculation of amount of gain (less if the at the end of fifth year is $34,900- - selling price - [cost-depreciation] $34,900 - | $693,000 - 662,000] Gain = $3,900)