Sabel Company purchased assembly equipment for $594,000 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 220,000 machine hours and a salvage value of $22,000. Actual machine-hour use was as follows. Year 1 58,000 Year 2 73,000 Year 3 44,000 Year 4 38,000 Year 5 12,000 Required Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. Assume that Sabel earns $232,000 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. Assume that Sabel sold the equipment at the end
Sabel Company purchased assembly equipment for $594,000 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 220,000 machine hours and a salvage value of $22,000. Actual machine-hour use was as follows. Year 1 58,000 Year 2 73,000 Year 3 44,000 Year 4 38,000 Year 5 12,000 Required Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. Assume that Sabel earns $232,000 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. Assume that Sabel sold the equipment at the end
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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Use exact info in question.
Sabel Company purchased assembly equipment for $594,000 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 220,000 machine hours and a salvage value of $22,000. Actual machine-hour use was as follows.
| Year 1 | 58,000 |
|---|---|
| Year 2 | 73,000 |
| Year 3 | 44,000 |
| Year 4 | 38,000 |
| Year 5 | 12,000 |
Required
- Compute the
depreciation for each of the five years, assuming the use of units-of-production depreciation. - Assume that Sabel earns $232,000 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.
- Assume that Sabel sold the equipment at the end of the fifth year for $22,800. Record the general
journal entry for the sale.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation.
Years
Depreciation
Year 1
Year 2
Year 3
Year 4
Year 5
Required A
Required B >
Transcribed Image Text:Required A
Required B
Required C
Assume that Sabel earns $232,000 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.)
Show lessA
SABEL COMPANY
Horizontal Statements Model for Year 1
Balance Sheet
Income Statement
Assets
Stockholders' Equity
Statement of Cash
Revenue
Expenses
Net Income
Flows
Common
Stock
Retained
Earnings
Book Value of
Event
Cash
+
Equipment
Balance
820,000 +
820,000 +
Equipment
+
+
Revenue
+
+
Depreciation
+
Balance
820,000 +
0 =
820,000 +
0 =
< Required A
Required C >
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