On January 2, 1998, Union Oil Company purchased a new airplane. The following costs are related to the purchase:

Airplane, base price . . . . . . . . . . $\$ 112,000$

Cash discount . . . . . . . . . . . . . . 3,000 Sales tax . . . . . . . . . . . . . . . 4,000 Delivery charges . . . . . . . . . . . 1,000 1. Prepare the journal entry to record the payment of these items on January 2, 1998.

2. Ignore your answer to part 1 and assume that the airplane cost $\$ 90,000$ and has an expected useful life of five years or 1,500 hours. The estimated salvage value is $\$ 3,000$. Using units-of-production depreciation and assuming that 300 hours are flown in 1999 , calculate the amount of depreciation expense to be recorded for the second year.

3. Ignore the information in parts 1 and 2 and assume that the airplane costs $\$ 90,000$, that its expected useful life is five years, and that its estimated salvage value is $\$ 5,000$. The company now uses the straight-line depreciation method. On January 1, 2001, the following balances are in the related accounts:

Airplane

$\$ 90,000$

Accumulated Depreciation, Airplane 51,000 Prepare the necessary journal entries to record the sale of this airplane on July 1,2001 , for $\$ 40,000$.