Question

Trainor Corporation purchased equipment at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2020 and was used 2,500 hours in 2020 and 2,100 hours in 2021. On January 1, 2022, the company decided to sell the equipment for $315,000. Trainor Corporation uses the units-of- production method to account for the depreciation on the equipment. Based on this information, the entry to record the sale of the equipment will show a gain of:

Select one: A. $45,000 B. $72,000 C. $5,000 D. $22,000

Trainor Corporation purchased equipment on January 1, 2020 at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years. At the end of two years, Trainor reevaluated the useful life of the equipment. Management extended the total useful life an additional 5 years, but estimated that the equipment would have no residual value at the end of this time. If the company uses straight-line depreciation, what amount would be recorded as depreciation expense each year, beginning with the third year?

Select one:

A. $40,000

B. $45,000

C. $50,000

D. $32,000

Answer 1

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