On March 31, 2016, the Herzog Company purchased a factory complete with machiner

Question

On March 31, 2016, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of S900,000 to the various types of assets along with estimated useful ives and residual values are as follows: Estimated Residual Value Asset Land Building Machinery 200,000 Equipment 150,000 Estimated Useful Life in Years NIA 25 Cost S 150,000 NIA 400,000 12% of cost $15,000 Total 900,000 On June 29, 2017, machinery included in the March 31, 2016, purchase that cost $90,000 was sold for 570,000. 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 2016. (Do not round intermediate calculations.) Building Machinery Equipment 2. Prepare the journal entries to record the depreciation on the machinery sold on June 29, 2017, and the sale of machinery. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) view transaction list view general journal Journal Entry Worksheet Record the depreciation on machinery sold Date June 29, 2017 General Journal Debit Credit

Explanation / Answer

Depreciation Building Depreciation per year = Cost-Salvage/ Life 400000/25 16000 Depreciation for 2016 16000*9/12 $12,000 Machinery Depreciation per year = (200000-12%*200000)/8 (200000-24000)/8 176000/8 22000 Depreciation for 2016 22000*9/12 $16,500 Equipment 5+4+3+2+1= 15 Depreciation (15000-15000)*5/15 135000/5 $27,000 2 Depreciation on Machinery Sold 2016 (90000-12%*90000)/8 9900 9900*6/12 $4,950 ( For 6 Months) Book Value 90000-9900-4950 75150 Cash Dr 70000 Loss on Sale 5150 To Machinery 75150 (

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