1. On January 2, 2012, Kinnamon Corp purchased equipment that cost $39,000. At the end of the equipment's 5 year useful life, Kinnamon expects to be able to recover the equipment's $2,000 residual value. The equipment is supposed to run for a total life of 10,000 hours. It is expected to be used 1,500 hours in year 1; 3,000 hours in year 2; 3,300 hours in year 3, and 1,100 hours each year for year's 4 and 5. A. Prepare a depreciation schedule for the asset's entire useful life using each of the following methods: 1. Straight Line 2. Production (Units of Production) 3. Double Declining Balance B. Assume that the company decided to sell the equipment in year 2 for $22,000 in cash. Prepare the required journal entry assuming the company used each of the following depreciation methods: 1. Straight Line 2. Production (Units of Production) 3. Double Declining Balance 2. On January 2, 2013, Morales Paint Company purchased a truck that cost $60,000 with a residual value of $5,000. The expected useful life of the truck is 4 years and 110,000 miles. It is expected to be driven 16,000 miles in the first year: 40,000 miles the second year: 30,000 miles in the third year and 24,000 miles in the fourth year. A. Prepare a depreciation schedule for the asset's entire useful life using each of the following methods: 1. Straight Line 2. Production (Units of Production) 3. Double Declining Balance B. Assume that the company decided to sell the truck in year 3 for $15,000 in cash. Prepare the required journal entry assuming the company used each of the following depreciation methods: 1. Straight Line 2. Production (Units of Production 3. Double Declining Balance 3. On January 2, 2013, Cohen Incorporated purchased machinery that cost $150,000 with a residual value of $15,000. The expected useful life of the machinery is 8 years and 20,000 units. It is expected to produce 2,000 units in year 1: 2,500 units in year 2; 3,000 units in year 3: 2,500 units in year 4: 2,500 units in year 5; 4,000 units in year 6; 2,500 units in year 7; and 1,000 units in year 8. A. Prepare a depreciation schedule for the asset's entire useful life using each of the following methods: 1. Straight Line 2. Production (Units of Production) 3. Double Declining Balance B. Assume that the company decided to sell the machinery in year 2 for $85,000 in cash. Prepare the required journal entry assuming the company used each of the following depreciation methods: 1. Straight Line 2. Production (Units of Production) 3. Double Declining Balance 4. A piece of equipment that cost $100,000 and on which $80,000 of accumulated depreciation had been recorded was disposed of on January 2, the first day of business of the current year. For each of the following assumptions, compute the gain or loss on the disposal and complete the necessary journal entry. A. The equipment was sold for $12,000 in cash. B. The equipment was sold for $36,000 in cash. C. The equipment was discarded as having no value
