Question
On January 1, 2015, Dragon Company paid cash to purchase an automobile. The car dealer gave Dragon a $1,000 cash discount off the $19,000 list
On January 1, 2015, Dragon Company paid cash to purchase an automobile. The car dealer gave Dragon a $1,000 cash discount off the $19,000 list price. However, Dragon paid an additional $2,000 to equip the car with a more luxurious interior so it would have greater appeal. Dragon Company expected the car to have a five-year useful life and a $5,000 salvage value. Dragon also expected to use the car for 150,000 miles before disposing of it. Dragon used the car, and it was driven 50,000 / 10,000 / 40,000 / 30,000 / 20,000 miles during each use year respectively. Dragon sold the car on January 1, 2020, for $4,500 cash.
- Under the units of production method of depreciation
- How much depreciation will Dragon have for each mile driven of the car?
- How much depreciation expense will Dragon have in the last three years under this method?
- When Dragon sold the car, what did it recognize and for how much?
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