Question

On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,050,000 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	$	125,000				N/A			N/A
Building		550,000				none			20
Machinery		190,000				12% of cost			8
Equipment		185,000			$	13,000			4
Total	$	1,050,000

On June 29, 2019, machinery included in the March 31, 2018, purchase that cost $105,000 was sold for $85,000. 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.

Answer 1

Please find below table useful to compute desired results: -

End Results would be as follows: -