Question

# The Green Company purchased equipment on October 1, 2020.  Assuming the cost of the equipment is \$70,000,...

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

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

 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

depreciation expense for the 2022 year- 47360

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)

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