Question

On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,090,000 to the various types of assets along with estimated useful lives and residual values are as follows:

Asset	Cost				Estimated Residual Value				Estimated Useful Life in Years
Land	$	145,000				N/A			N/A
Building		590,000				none			20
Machinery		150,000				12% of cost			8
Equipment		205,000			$	16,000			6
Total	$	1,090,000

On June 29, 2019, machinery included in the March 31, 2018, purchase that cost $109,000 was sold for $89,000. Herzog uses the straight-line depreciation method for buildings and machinery and the sum-of-the-years'-digits method for equipment. Partial-year depreciation is calculated based on the number of months an asset is in service.

Required:

1. Compute depreciation expense on the building, machinery, and equipment for 2018.
2. Prepare the journal entries to record the depreciation on the machinery sold on June 29, 2019, and the sale of machinery.
3. Compute depreciation expense on the building, remaining machinery, and equipment for 2019.

Compute depreciation expense on the building, machinery, and equipment for 2018. (Do not round intermediate calculations.)

	Depreciation Expense Building Machinery Equipment

Journal entry worksheet

Record the depreciation on machinery sold.

Record the sale of machinery.

Note: Enter debits before credits.

	Date General Journal Debit Credit June 29, 2019

Compute depreciation expense on the building, remaining machinery, and equipment for 2019. (Do not round intermediate calculations.)

	Depreciation Expense Building Machinery Equipment

Answer 1

1. Depriciation expenses for the year 2018 are as follows :-

	Depreciation exp
Building (note 1)	$22125
Machinery (note 2)	$12375
Equipment (note 3)	$40500

Note :-

1 Building = (590000/20)x9/12 = $22125

2 Machinery = [{150000-(150000x12%)}/8]x9/12 = {(150000-18000)/8}x9/12 = $12375

3 Equipment = [(205000-16000)x6/21^*]x9/12 = $40500

* Sumof years digit method = 1+2+3+4+5+6 = 21

For first year depreciation proportion = 6/21

For second year depreciation proportion = 5/21

Accordingly for other years we can calculate

2. Journal entry for recording depreciation and sale of machinery costing $109000 on June 29, 2019

Date	General journal	debit	credit
June 29, 2019	Depreciation exp (note 4) Accumulated depreciation - machinery (To depreciation on machinery recorded for half year )	5995	5995
June 29, 2019	Cash Accumulated depreciation (note 5) Loss on sale of machinery Machinery (To sale of machinery recorfrd)	89000 14988 5012	109000

Note

4. Depreciation exp on machine of 109000 till June 29, 2019

= [{109000-(109000x12%)}/8]x6/12 = $5995

5 . Depreciation for 2018 = [{109000-(109000x12%)}/8]x9/12 = 8992.5

Depreciation for 2019 = [{109000-(109000x12%)}/8]x6/12 = 5995

Accumulated deprivation on machine till June 29, 2019 = 8993+5995 = $14988

3 . Depriciation exp for 2019

	Depreciation exp
Building (note 6)	$29500
Machinery (note 7)	$4510
Equipment (note 8)	$47250

Note :-

6. Depreciation on building for 2019 = 590000/20 = $29500

7. Dep. On machinery for 2019 = {41000-(41000x12%)}/8 = $4510

8. Dep. On equipment for 2019

189000x6/21x3/12 = $13500

189000x5/21x9/12 = $33750

Total depriciation = $47250