Sabel Company purchased assembly equipment for $558,000 on January 1, Year 1. Sabel's financial condition immediately prior to the purchase is shown in Required B. The equipment is expected to have a useful life of 310,000 machine hours and a salvage value of $31,000. Actual machine-hour use was as follows. Year 1 Year 2 Year 3 Year 4 Year 5 Required a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. b. Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a horizontal statements model. c. Assume that Sabel sold the equipment at the end of the fifth year for $32,700. Record the general journal entry for the sale. Complete this question by entering your answers in the tabs below. Required A Required B Required C 77,000 102,000 53,000 57,000 31,000 Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a horizontal statements model. (In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change, or leave blank for not affected. Leave blank to indicate that an element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.) Event Balance Equipment Revenue Depreciation Balance Cash Assets 910,000 + (558,000) + 241,000+ + 593,000 + Balance Sheet Book Value of Equipment 558,000 558,000 = SABEL COMPANY Horizontal Statements Model for Year 1 Stockholders' Equity Retained Earnings Common Stock 910,000+ + + 910,000 + 0 Revenue < Required A 0 Income Statement Expenses = = = = = 0 = Net Income Required C > 0 Statement of Cash Flows 0 Show less
Sabel Company purchased assembly equipment for $558,000 on January 1, Year 1. Sabel's financial condition immediately prior to the purchase is shown in Required B. The equipment is expected to have a useful life of 310,000 machine hours and a salvage value of $31,000. Actual machine-hour use was as follows. Year 1 Year 2 Year 3 Year 4 Year 5 Required a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. b. Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a horizontal statements model. c. Assume that Sabel sold the equipment at the end of the fifth year for $32,700. Record the general journal entry for the sale. Complete this question by entering your answers in the tabs below. Required A Required B Required C 77,000 102,000 53,000 57,000 31,000 Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a horizontal statements model. (In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change, or leave blank for not affected. Leave blank to indicate that an element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.) Event Balance Equipment Revenue Depreciation Balance Cash Assets 910,000 + (558,000) + 241,000+ + 593,000 + Balance Sheet Book Value of Equipment 558,000 558,000 = SABEL COMPANY Horizontal Statements Model for Year 1 Stockholders' Equity Retained Earnings Common Stock 910,000+ + + 910,000 + 0 Revenue < Required A 0 Income Statement Expenses = = = = = 0 = Net Income Required C > 0 Statement of Cash Flows 0 Show less
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Sabel Company purchased assembly equipment for $558,000 on January 1, Year 1. Sabel's financial condition immediately prior to the
purchase is shown in Required B.
The equipment is expected to have a useful life of 310,000 machine hours and a salvage value of $31,000. Actual machine-hour use
was as follows.
Year 1
Year 2
Year 3
Year 4
Year 5
Required
a. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation.
b. Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the
revenue and the depreciation expense for the first year in a horizontal statements model.
c. Assume that Sabel sold the equipment at the end of the fifth year for $32,700. Record the general journal entry for the sale.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
77,000
102,000
53,000
57,000
31,000
Assume that Sabel earns $241,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first
year in a horizontal statements model. (In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for
net change, or leave blank for not affected. Leave blank to indicate that an element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus
sign.)
Event
Balance
Equipment
Revenue
Depreciation
Balance
Cash
Assets
910,000 +
(558,000) +
241,000+
+
593,000 +
Balance Sheet
Book Value of
Equipment
558,000
558,000 =
SABEL COMPANY
Horizontal Statements Model for Year 1
Stockholders' Equity
Retained
Earnings
Common
Stock
910,000+
+
+
910,000 +
0
Revenue
< Required A
0
Income Statement
Expenses
=
=
=
=
=
0 =
Net Income
Required C >
0
Statement of Cash
Flows
0
Show less
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