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Problem 6-27 Computing and recording units-of-production depreciation

Problem 6-27 Computing and recording units-of-production depreciation
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Survey of Accounting
Second (2nd) Edition
Thomas Edmonds, Philip Olds, Frances McNair, Bor-Yi Tsay
ACC 201 ACC/201 Accounting 201

Problem 6-27 Computing and recording units- of- production depreciation

Brees Corporation purchased a delivery van for $ 35,500 in 2010. 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 $ 5,500. Actual mileage was as follows.
2010 50,000
2011 70,000
2012 58,000
a. Compute the depreciation for each of the three years, assuming the use of units- of- production depreciation.
b. Assume that Brees earns $ 21,000 of cash revenue during 2010. 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 preceding one.
c. Assume that Brees sold the van at the end of the third year for $ 4,000. Calculate the amount of gain or lose from the sale.

Check: a. Depreciation Expense, 2010: $ 10,000 c. Loss on Sale: $( 1,500)



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