Question

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Howarth Manufacturing Company purchased equlpment on June 30, 2017, at a cost of $165,000. The residual value of the equlpment was estimated to be $15,000 at the end of a five-year life. The equipment was sold on March 31, 2021, for $50,000. Howarth uses the stralght-line depreclation method for all of its plant and equipment. Partlal-year depreclation 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 is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming that Howarth had instead used the double-declining-balance method, prepare the journal entry to record the sale (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event General Journal Debit Credit 1 Cash 50,000 Accumulated depreciation-equipment 127,500 Gain on sale of equipment 12,500 Equipment 165,000 Required 1 Required 2

Answer 1

Under Straight Line Cost Price of Equipment Less Residual Value Depreciable Value (A) Number of Years of Life (B) Depreciation Amount (A/B) 165,000 (15,000) 150,000 30,000 Year 2017 2018 2019 2020 2021 Beginning Value (A) 165,000 150,000 120,000 90,000 60,000 Depreciation Expense Accumulated Depreciation (B) 15,000 15,000 30,000 45,000 30,000 75,000 30,000 105,000 112,500 Book Value (A-B) 150,000 120,000 90,000 60,000 52,500 7,500 Debit Credit Event General Journal 1 Cash Accumulated Depreciation Loss on Sale of Equipment Equipment 50,000 112,500 2,500 165,000

Under Double Declining Rate = 100 % *2 5 Rate 40% Year Accumulated Depreciation Rate (B) 2017 2018 2019 2020 2021 Beginning Value (A) 165,000 132,000 79,200 47.520 28,512 40% 40% 40% 40% 40% Depreciation Expense (A *B) = (C) 33,000 52,800 31,680 19,008 2,851 33,000 85,800 117,480 136,488 139,339 Book Value (A-C) 132,000 79,200 47,520 28,512 25,661 Debit Credit Event General Journal 1 Cash Accumulated Depreciation Gain on Sale of Equipment Equipment 50,000 139,339 24,339 165,000