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Spacely Sprockets, Inc. invested $5,049,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of

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Spacely Sprockets, Inc. invested $5,049,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of 8 years, or 28,800 machine hours and a residual value of $502,000. In its first year in operation the equipment was used for 2,150 hours and an additional 2,760 hours in its second year of usage. The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below. All items rounded to nearest whole dollar. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales $35,348,000 $36,616,000 COGS $22,464,000 $23,857,000 Gross Profit $12,884,000 $12,759,000 Operating Expenses (before adding in Depreciation) $7,660,000 $8,147,000 Income from Operations $5,224,000 $4,612,000 Income Tax Expense (at 30%) $1,567,200 $1,383,600 Net Income $3,656,800 $3,228,400 Round all items to the nearest whole dollar and use rounded values for all future calculations. Year Depreciation per unit X Number of hours used = Total Depreciation Year 1 X Year 2 11 2. Recalculate the Income Statement for Year 1 and Year 2 including the Depreciation Expense as part of the Operating Expenses. Year 1 Year 2 Spacely Sprockets, Inc. Net Sales COGS Gross Profit Operating Expenses (before adding in Depreciation) Income from Operations Income Tax Expense (at 30%) Net Income

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