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.

Transcribed Image Text:

Assets Equity Rev. - Exp. = Net Inc. Cash Flow Cash + Book Value of Equip. = Com. Stk. + Ret. Earn. 800,000 + NA = 800,000 NA NA - NA = NA NA