Question #6. Independent cases:

A. On January 1, NetsCompany paid $48,000 for a new delivery truck. It was estimatedthat the truck would be driven 100,000 miles during the next 5years, at which time it would have a salvage value of $3,000.During the first and second years, the odometer registered 22,000and 40,000 miles, respectively. Calculate the depreciation expenseNets Company needs to record at the end of year I & end of year2. Nets Company uses the Units of Production method to account fordepreciation. What is the book value of the truck at the end of2^nd year.

B. On Jan. 1, 2004,Cav Co., which uses straight-line depreciation, purchased equipmentfor $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 ofthis disposition? Indicate the impact of the disposition on theincome statement & balance sheet.

C. On Nov. 1, 2005,GoodTaste Magazine received $36,000 of annual magazinesubscriptions. On Dec. 31, 2005, the end of fiscal year, Managementof GoodTaste decided to recognize the $36,000 as revenues for theyear 2005. Do you agree with GoodTaste Management? Explain. Howshould GoodTaste Magazine report this in its financial statementsas of Dec. 31, 2005?