Sabel Co. purchased assembly equipment for $500,000 on January 1, Year 1. Sabels financial condition immediately prior
Question:
Sabel Co. purchased assembly equipment for $500,000 on January 1, Year 1. Sabel’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 200,000 machine hours and a salvage value of $20,000. Actual machine-hour use was as follows:
Year 1 ....................56,000
Year 2 ....................61,000
Year 3 ....................42,000
Year 4 ....................36,000
Year 5 ....................10,000
Required
a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation.
b. Assume that Sabel earns $230,000 of cash revenue during Year 1. 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 Sabel sold the equipment at the end of the fifth year for $20,600. Calculate the amount of gain or loss on the sale of equipment.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds