Friendly Corporation purchased a delivery van for $28,500 in Year 1. The firm’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 200,000 miles and a salvage value of $2,500. Actual mileage was as follows:

Year 1 .............................60,000
Year 2 .............................50,000
Year 3 .............................55,000

Required
a. Compute the depreciation for each of the three years, assuming the use of units-of-production depreciation.
b. Assume that Friendly earns $26,000 of cash revenue during Year 1. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the one shown earlier.
c. Assume that Friendly sold the van at the end of the third year for $8,000. Calculate the amount of gain or loss on the sale of equipment.

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Balance Sheet Income Statement Statement of Cash Flows Stk. Equity Ret. Earn. Assets Book Value of Van Com. Stk. Cash Net Inc. Rev. Exp. NA NA 50,000 NA 50,000 NA NA NA