Computing and recording units-of-production depreciation
McNabb Corporation purchased a delivery van for $25,500 in 2012. The firmâ€™s financial condition immediately prior to the purchase is shown in the following horizontal statements model:
The van was expected to have a useful life of 150,000 miles and a salvage value of $3,000. Actual mileage was as follows:
a. Compute the depreciation for each of the three years, assuming the use of units-of-production depreciation.
b. Assume that McNabb earns $21,000 of cash revenue during 2012. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a fi nancial statements model like the preceding one.
c. Assume that McNabb sold the van at the end of the third year for $4,000. Calculate the amount of gain or lose from the sale.