Question #6. Independent cases:

A. On January 1, Nets Company paid $48,000 for a new delivery truck. It was estimated that the truck would be driven 100,000 miles during the next 5 years, at which time it would have a salvage value of $3,000. During the first and second years, the odometer registered 22,000 and 40,000 miles, respectively. Calculate the depreciation expense Nets Company needs to record at the end of year I & end of year 2. Nets Company uses the Units of Production method to account for depreciation. What is the book value of the truck at the end of 2^nd year.

B. On Jan. 1, 2004, Cav Co., which uses straight-line depreciation, purchased equipment for $60,000 with a useful life of 7 years and $4,000 salvage value. On April 1, 2008, the equipment was sold for $30,000 cash. What gain or loss should Cav recognize as a result of this disposition? Indicate the impact of the disposition on the income statement & balance sheet.

C. On Nov. 1, 2005, GoodTaste Magazine received $36,000 of annual magazine subscriptions. On Dec. 31, 2005, the end of fiscal year, Management of GoodTaste decided to recognize the $36,000 as revenues for the year 2005. Do you agree with GoodTaste Management? Explain. How should GoodTaste Magazine report this in its financial statements as of Dec. 31, 2005?