Yukon Productions Corp. purchased equipment on March 1, 2012, for $70,000. The company estimated the equipment would have a useful life of three years and produce 12,000 units, with a residual value of $10,000. During 2012, the equipment produced 4,900 units. On November 30, 2013, the machine was sold for $18,000 and had produced 5,600 units that year.
Instructions
(a) Record all the necessary entries for the years ended December 31, 2012 and 2013, using the following depreciation methods:
(1) Straight-line,
(2) Single diminishing-balance,
(3) Units-of-production.
(b) Prepare a schedule to show the overall impact of the total depreciation expense, combined with the gain or loss on sale, for the two-year period, under each method of depreciation (consider the total effect on profit over the two-year period). Comment on your results.