Question

The Green Company purchased equipment on October 1, 2020.  Assuming the cost of the equipment is $70,000, the residual value is $6,000, and uses the units of production method for depreciation.  

During its useful life, the equipment was expected to be used for 10,000 hours.  Anticipated annual hourly use was as follows: 1300 hours in 2020, 2800 hours in 2021, 3300 hours in 2022, 1900 hours in 2023 and 700 hours in 2024.

1) What is the depreciation per unit of production? $ Answer

2) What is accumulated depreciation at December 31, 2021? $ Answer

3) What is depreciation expense for the 2022 year? $ Answer

4) What is the carrying value of the asset at December 31, 2024? $ Answer

You were asked to prepare the journal entry to record the sale of the above equipment on December 31, 2022.

Is it a gain or loss if the equipment was sold for $30,000? AnswerLOSSGAIN

How much is the gain or loss? $ Answer

Answer 1

Answert 1

Total Cost	70000
Less: Residual Value	6000
Depreciable value	64000
Depreciation expense per unit	6.4	(Depreciable cost/Total usage)

Answer 2

Units of production method
		Depreciation for the year
Depreciable value*Hours used/Total Hours
	Year	Book Value	Depreciation	Accumulated	Book
		Beginning	Expense	Deprecaition	value
	2020	70000	8320	8320	61680
	2021	61680	17920	26240	43760
	2022	43760	21120	47360	22640
	2023	22640	12160	59520	10480
	2024	10480	4480	64000	6000

accumulated depreciation at December 31, 2021- 26240

Answer 3

depreciation expense for the 2022 year- 47360

Answer 4

carrying value of the asset at December 31, 2024- 6000

Date	Account Details	Debit	Credit
Dec 31,2022	Cash	30000
	Accumulated Depreciation	22640
	Loss on sale of equipment	17360
	To Equipment		70000
	(To record sale of asset)