Question

Wildhorse uses the diminishing-balance method at one times the straight-line depreciation rate. Wildhorse Limited purchased delivery equipment on March 1, 2019, for $131,250 cash. At that time, the equipment was estimated to have a useful life of five years and a residual value of $10,080. The equipment was disposed of on November 30, 2021. Wildhorse uses the diminishing-balance method at one times the straight-line depreciation rate, has an August 31 year end, and makes adjusting entries annually.

Record the disposal of the equipment on November 30, 2021, under each of the following independent assumptions: (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. It was sold for $61,370. 2. It was sold for $86,740. 3. It was retired for no proceeds.

Answer 1

	Depreciation rate =(1 / 5 Years)*1 =0.20 or 20%
	Depreciation for 6 months in 2019(March 1,2019 to August 31,2019) =$131,250*20% =$26,250*6/12 =$13,125
	Depreciation for 12 months(Sept 1,2019 to August 31,2020) =($131,250-$13,125)*20% =$23,625
	Depreciation for 12 months(Sept 1,2020 to August 31,2021) =($131,250-$13,125-$23,625)*20% =$18,900
	Depreciation for 3 months in 2021(Sept 1,2021 to Nov 30,2021) =($131,250-$13,125-$23,625-$18,900)*20%*3/12 =$3,780
	Accumulated Depreciation on date of Sale =$13,125 + $23,625 + $18,900 + $3,780 =$59,430
Case 1:
Date	Accounts and explanation	Debit	Credit
Nov 30,2021	Cash	$                             61,370
	Accumulated Depreciation-Equipment	$                             59,430
	Loss on sale of equipment	$                             10,450
	Equipment		$          131,250
Case 2:
Date	Accounts and explanation	Debit	Credit
Nov 30,2021	Cash	$                             86,740
	Accumulated Depreciation-Equipment	$                             59,430
	Gain on sale of equipment		$            14,920
	Equipment		$          131,250
Case 3:
Date	Accounts and explanation	Debit	Credit
Nov 30,2021	Accumulated Depreciation-Equipment	$                             59,430
	Loss on disposal of equipment	$                             71,820
	Equipment		$          131,250