McNabb Corporation purchased a delivery van for \(\$ 25,500\) in 2011. The firm's financial condition immediately prior to the purchase is shown in the following horizontal statements model:

The van was expected to have a useful life of 150,000 miles and a salvage value of \(\$ 3,000\). Actual mileage was as follows:

Required

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

b. Assume that McNabb earns \(\$ 21,000\) of cash revenue during 2011. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the one shown above.

c. Assume that McNabb sold the van at the end of the third year for \(\$ 4,000\). Record the general journal entry for the sale.

Transcribed Image Text:

Assets Equity Rev. - Exp. = Net Inc. Cash Flow Cash + Book Value of Van = Com. Stk. + Ret. Earn. 50,000 + NA = 50,000 NA NA NA => NA NA