Question

On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $950,000 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		450,000				none			20
Machinery		250,000				12% of cost			10
Equipment		125,000			$	13,000			4
Total	$	950,000

On June 29, 2019, machinery included in the March 31, 2018, purchase that cost $95,000 was sold for $75,000. 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.

Depreciation Expense

Building	$
Machinery	$
Equipment	$

2. Prepare the journal entries to record the depreciation on the machinery sold on June 29, 2019, and the sale of machinery.

Record the depreciation on machinery sold.

Record the sale of machinery
3. Compute depreciation expense on the building, remaining machinery, and equipment for 2019.

Depreciation Expense

Building	$
Machinery	$
Equipment	$

Answer 1

solution

1.

Process deterioration cost on the building, hardware, and gear for 2013. (Try not to round transitional computations.)

Building:

$450,000/20 years x 9/12

= $16875

Hardware:

[$250,000 - ($250,000 x 12%)]/10 = $22000

Hardware:

($125000 - $13000) x 4/10* = $44800

$10,000 x 9/12 = $33600

Aggregate of the digits: [4 x (4+ 1)]/2 = 10

2.

Set up the diary passage to record the deterioration on the hardware sold on June 29, 2014, and the closeout of apparatus. (On the off chance that no passage is required for an exchange, select "No diary section required" in the principal account field.)

Deterioration on the hardware sold on June 29, 2014

Dr Depreciation cost 4180

Cr Accumulated deterioration - Machinery 4180

[$95000 - ($95000 x 12%)]/10 years = $8360

$8,976 x 6/12 = $4180

The clearance of hardware on June 29, 2014

Dr Cash 75000

Dr Accumulated deterioration - Machinery 10450

Dr Loss marked down of hardware 9550

Cr Machinery 95000

***$8360 x 9/12 = $6270

$8360 x 6/12 = $4,180

All out $10450

3.

Figure deterioration cost on the building, remaining hardware, and gear for 2014. (Try not to round moderate figurings.)

Building:

$450,000/20 years = $22500

Apparatus:

[$155,000 - ($155,000 x 12%)]/10 = $13640

($250,000 - 95,000 = $155000)

Gear:

($125000 - 13000) x 5/15 x 3/12

= $9333

($125000 - 13000) x 4/15 x 9/12

= $22400

Absolute $31733