Computing and recording units-of-production depreciationMarvel purchased assembly equipmen...

Computing and recording units-of-production depreciation

Marvel purchased assembly equipment for $700,000 on January 1, 2011. Marvel’s financial condition immediately prior to the purchase is shown in the following horizontal statements model:

The equipment is expected to have a useful life of 100,000 machine hours and a salvage value of $20,000. Actual machine-hour use was as follows:

Required

a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation.

b. Assume that Marvel earns $320,000 of cash revenue during 2011. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the preceding one.

c. Assume that Marvel sold the equipment at the end of the fifth year for $18,000. Record the general journal entry for the sale.