Question

The car dealer gave Unicorn a $2,000 cash discount off the $31,000 list price. However, Unicorn paid an additional $6,000 to equip the car with a more luxurious interior and high tech lighting so it would have greater appeal. Unicorn Company expected the car to have a five-year useful life and a $5,000 salvage value. Unicorn also expected to use the car for 150,000 miles before disposing of it. Unicorn used the car, and it was driven 50,000 / 10,000 / 40,000 / 30,000 / 20,000 miles during each use year respectively. Unicorn sold the car on January 1, 2020, for $7,500 cash. (SHOW ALL CALUCUALTIONS)

1. What is the cost of the car that Unicorn Company will record?

1. Under the straight line method of depreciation, how much depreciation expense will Unicorn have each year of the car’s use?

1. Under the double declining balance method of depreciation
   1. What is the percentage depreciation Unicorn will use?

1. At the end of the first year, how much depreciation expense will Unicorn have for the car?

1. At the end of the first year, what will be the book value the car?

1. At the end of the second year, how much depreciation expense will Unicorn have for the car?

1. At the end of the second year, what will be the book value the car?

1. Under the units of production method of depreciation
   1. How much depreciation will Unicorn have for each mile driven of the car?

1. How much depreciation expense will Unicorn have in the last three years under this method?

1. When Unicorn sold the car, what did it recognize as a gain or loss and for how much? Show calculation in proper format and put into the accounting equation.

Answer 1