Question

Ivanhoe Productions Corp. purchased equipment on March 1, 2018, for $70,000. The company estimated the equipment would have a useful life of three years and produce 12,000 units, with a residual value of $8,200. During 2018, the equipment produced 4,900 units. On November 30, 2019, the machine was sold for $16,000 and had produced 5,900 units that year.

Answer 1

CALCULATION OF THE DEPRECIATION AS PER UNIT METHOD
Purchase Cost of Equipment	$                                         70,000
Less: Salvage Value	$                                           8,200
Net Value for Depreciation	$                                         61,800
Expected units to Produce	12,000	Units
Depreciation per Units	$                                             5.15	Per Unit Cost
($ 61,800 / 12,000 Units)
Depreciation for the year 2018 = 4,900 units X $ 5.15 =		$                      25,235
Depreciation for the year 2019 = 5,900 units X $ 5.15 =		$                      30,385
CALCULATION OF THE GAIN OR LOSS ON SALE OF EQUIPMENT
Purchase cost =	$                                         70,000
Less: Depreciation for the year 2018	$                                         25,235
Less: Depreciation for the year 2019	$                                         30,385
Book Value	$                                         14,380
Sales Value	$                                         16,000
Gain on sale of Equipment	$                                           1,620