Wildhorse Limited sells equipment on September 30, 2018, for $43,210 cash. The e

Question

Wildhorse Limited sells equipment on September 30, 2018, for $43,210 cash. The equipment originally cost $150,700 when purchased on January 1, 2016. It has an estimated residual value of $4,400 and a useful life of five years. Depreciation was last recorded on December 31, 2017, the company’s year end.

Record debit side accounts first followed by credit side accounts.

Prepare the journal entry to update depreciation using the straight-line method to September 30, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record the sale of the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts Account Titles and Explanation Debit Credit

Explanation / Answer

Solution:

Annual Depreciation using straight line method = (Cost of Equipment – Salvage Value) / Useful life

= (150,700 – 4,400) / 5

= $29,260

Accumulated Depreciation upto the last recorded date Dec 31, 2017 (i.e. 2 years) = Annual Depreciation x 2 = 29,260*2 = $58,520

The depreciation amount from Jan 1, 2018 to September 30, 2018 (9 months) = 29,260*9/12 = $21,945

Journal Entry to update the depreciation to Sept 30, 2018

Date

Account Titles and Explanation

Debit

Credit

Sept.30, 2018

Depreciation Expense (Refer note 1)

$21,945

Accumulated Depreciation - Equipment

$21,945

Journal Entry to record the sale

Date

Account Titles and Explanation

Debit

Credit

Sept.30, 2018

Cash

$43,210

Accumulated Depreciation - Equipment

(58,520 + 21945)

$80,465

Loss on Sale of Equipment

$27,025

Equipment

$150,700

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Date

Account Titles and Explanation

Debit

Credit

Sept.30, 2018

Depreciation Expense (Refer note 1)

$21,945

Accumulated Depreciation - Equipment

$21,945

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