Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $

Question

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $165,000. The residual value of the lathe was estimated to be $15,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $50,000. 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 a schedule to calculate the gain or loss on the sale.
2. Prepare the journal entry to record the sale.
3. Assuming that Howarth had instead used the sum-of-the-years’-digits depreciation method, prepare the journal entry to record the sale.

Prepare a schedule to calculate the gain or loss on the sale.

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.)

3. Assuming that Howarth had instead used the sum-of-the-years’-digits depreciation 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.)

Explanation / Answer

1) Loss on the sales will be $2,500 -

2) Journal entry to record the sale-

3)Journal Entry to record sale when sum-of-the-digit depreciation method is used -

DATE AMOUNT 30June 2014 $1,65,000 (-) depreciation (1,65,000-15,000/5)*9/12 ($22,500) balance on 31 march 2015 $1,42,500 (-) depreciation $(30,000) balance on 31 march 2016 $1,12,500 (-) depreciation $(30,000) balance on 31 march 2017 $82,500 (-) depreciation $(30,000) balance on 31 march 2018 $52,500 (-) sales $(50,000) LOSS $(2,500)

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.