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Sagot :
(1) The journal entry to record the sale is:
March 31, 2021 Cash $43,000
Accumulated depreciation $112,500
Loss on sale $4,500
Equipment $160,000
(2) Howarth had instead used the double-declining-balance method, then the journal entry to record the sale is:
March 31, 2021 Cash $43,000
Accumulated depreciation $135,117
Gain on sale $18,117
Equipment $160,000
In the given question,
Howarth manufacturing company purchased equipment on June 30, 2020, at a cost of $115,000.
The residual value of the equipment was estimated to be $10,000 at the end of a five-year life.
The equipment was sold on march 31, 2024, for $33,000.
(1) We have to prepare the journal entry to record the sale.
Depreciation under Straight line method = (Cost - Residual value) / Estimated useful life
Depreciation under Straight line method = ($160,000 - $10,000) / 5
Depreciation under Straight line method = $30,000
Depreciation expense
2017 $15,000 ($30,000*6/12)
2018 $30,000
2019 $30,000
2020 $30,000
2021 $7,500 ($30,000*3/12) = $112,500
March 31, 2021 Cash $43,000
Accumulated depreciation $112,500
Loss on sale $4,500
Equipment $160,000
(2) Assuming that Howarth had instead used the double-declining-balance method, then we have to prepare the journal entry to record the sale.
Depreciation under Double declining balance method = (Cost - Accumulated depreciation) / Useful life * 2
Depreciation expense
2017 $32,000 [($160,000 - $0)/5*2*6/12]
2018 $51,200 [($160,000-$32,000)/5*2]
2019 $30,720 [($160,000-$32,000-$51,200)/5*2]
2020 $18,432 [($160,000-$32,000-$51,200-$30,720)/5*2]
2021 $2,765[($160,000-$32,000-$51,200-$30,720-$18,432)/5*2*3/12]
$135,117
March 31, 2021 Cash $43,000
Accumulated depreciation $135,117
Gain on sale $18,117
Equipment $160,000
To learn more about double-declining-balance method link is here
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