Depreciation methods; disposal; partial periods • LO11–2 Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. 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.
Depreciation methods; disposal; partial periods • LO11–2 Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. 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.
Solution Summary: The author explains that depletion is the allocation of cost of natural resources to expense over resource’s the useful time in a systematic and normal manner.
Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. 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.
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