Friendly Corporation purchased a delivery van for $28,500 in 2016. The firm’s financial condition immediately prior to the purchase is shown in the following horizontal statements model:
The van was expected to have a useful life of 200,000 miles and a salvage value of $2,500.
Actual mileage was as follows:
a. Compute the depreciation for each of the three years, assuming the use of units-of-production depreciation.
b. Assume that Friendly earns $26,000 of cash revenue during 2016. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the one shown above.
c. Assume that Friendly sold the van at the end of the third year for $8,000. Record the general journal entry for the sale.