Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $
ID: 2596736 • Letter: H
Question
Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $145,000. The residual value of the lathe was estimated to be $14,500 at the end of a five-year life. The lathe was sold on March 31, 2018, for $46,000. 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.
Explanation / Answer
Answer to part 1
W.Note : calculation of accumulated depreciation
Depreciation = cost - salvage value / life years
= $145000 - $14500 / 5
= 26100
Answer to part 2
Answer to part 3
W.Note
Depreciation schedule
Clculation of gain or loss on disposal of lathe
Particulars Amt Cost of Lathe Asset $ 145,000.00 Less: Accumulated Depreciation $ 97,875.00 Net Book Value $ 47,125.00 Less: Sale Price $ 46,000.00 Loss on Disposal of Lathe Asset $ (1,125.00)Related Questions
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