Question

Sabel Co. purchased assembly equipment for $836,000 on January 1, Year 1. The equipment is expected to have a useful life of 380,000 miles and a salvage value of $38,000. Actual mileage was as follows: Year 1 104,000 Year 299,000 Year 3 90,000 Year 4 64,000 Year 5 28,000 Required a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. b. Assume that Sepel earns $248,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of th revenue and the depreciation expense for the first year in the following financial statements model. c. Assume that Sabel sold the equipment at the end of the fifth year for $40,400. Calculate the amount of gain or loss on the sale. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. (Do not round intermediate calculations.) Years Depreciation Year 1 Year 2 Year 3 Drau Next >

Answer 1

Required A
	Depreciation rate
	(836,000-38000)/380,000
	2.1	per machine hour
	Years	Depreciation
	Year 1	218400
	Year 2	207900
	Year 3	189000
	Year 4	134400
	Year 5	48300
Required B
	Assets		Stockholders Equity
					Revenue	expenses	Net	Cash flow
Event	Cash	BV of	Common	Retained			income
		Equipment	Stock	Earnings
Balance	980,000		980,000
Equipment	-836,000	836,000						-836,000	IA
Revenue	248,000			248,000	248,000		248,000	248,000	OA
Depreciation		-218400		-218400		218400	-218400	0
Balance	392,000	617600	980,000	29600	248,000	218400	29,600	-588000	NC
Required C
	Gain on sale		2,400
	Cash				40,400
	Accumulated depreciation				798000
	Gain on sale					2,400
	Equipment					836,000