Question

Howarth Manufacturing Company purchased equipment on June 30, 2017, at a cost of $800,000. The residual value of the equipment was estimated to be $50,000 at the end of a five year life. The equipment was sold on March 31, 2021, for $170,000. Howarth uses the straight- line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service Required: 1. Prepare the journal entry to record the sale. 2. Assuming that Howarth had instead used the double-declining balance method, prepare the journal entry to record the sale.

Answer 1

0 Puchased egrefpment on June 30, 2014 (am) - $ 8,00,000 Salvage value = 450,000 life = 5yrs Depreciation each year = 8,00,000 - 50000 = 150,000 p.a. . For 2017 = 1,50,000+ 9 = 1,12,500 Carrying amount of equipment on 31 Mach 2024 = 800,000 -1,12,500 - 1,50,000 -1,10,000 - 1,50,000 -1,500,000 Book value = 87500 as on 31 Mach 202) Journal Entey - $1,70,000 Cash/Bank ...... Dr quinoa To Equipment $87500 To profit on sale $82500

@ Double declining method Cost 1,601000x100=20% 8,00,000 kalor 5 8,000000 declining method - 2x20%= 45% Double Book value Depreaahon De Depreciation Book value year year and Expense o year start 5,60,000 30% 2140,000 2017 8,00,000 (40x9/12) 3,36,000 2,24 000 2018 5,60,000 40% 40% 201600 1,34900 3,36,000 2019 120960 80640 20160o 2020 40% 40% 72576 - 48384 120960 2011 DO 960 Journal entry on sale. Cash / Bank $170,000 To Eqripment 72576 To proptonsale. 97424