Question

On March 31, 2021, the Herzog Company purchased a factory complete with vehicles 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
Equipment		155,000				12% of cost			10
Vehicles		200,000			$	16,000			10
Total	$	1,090,000

On June 29, 2022, equipment included in the March 31, 2021, purchase that cost $109,000 was sold for $89,000. Herzog uses the straight-line depreciation method for building and equipment and the double-declining-balance method for vehicles. Partial-year depreciation is calculated based on the number of months an asset is in service.

Required:

1. Compute depreciation expense on the building, equipment, and vehicles for 2021.
2. Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2022, and the sale of equipment.
3. Compute depreciation expense on the building, remaining equipment, and vehicles for 2022.

Answer 1

depreciation
particulars	cost		dep (for year)SLM	depreciation for 2021
			cost-estimated residual value/no of years	total depreciation for 9 months
building	5,90,000.00		29,500.00	22,125.00
equipment	1,55,000.00		13,640.00	10,230.00
vehicles	2,00,000.00		18,400.00	27,600.00
note: for vehicles it is multiplied by 2 as double declining method				59,955.00

2.

date :29/06/2019
By cash a/c                      dr.	89000
By loss on sale A/c          dr.	8010
To equipment A/c	97010

given
purchase cost	109000
sale price is	89000
purchase price	109000
depreciation for 2021 (for 9 months)	9592
(109000-.12*109000)/10=9592*9/12	7194
depreciation for 2022(for 6 months)
	4796
balace as per 29th june(purchase price - dep)	97010
sale price	89000
loss	8010

3.

depreciation
particulars	cost	depreciation for 2021	dep for 2022
		total depreciation for 9 months		balance
building	5,90,000.00	22,125.00	29,500.00	5,38,375.00
equipment	1,55,000.00	10,230.00	4,154.92	43060 (from note1)
vehicles	2,00,000.00	27,600.00	36,800.00	1,35,600.00
note: for vehicles it is multiplied by 2 as double declining method

note 1
euip	155000
less dep	10230
less equip sold	97555
balance	47215
dep	4154.92
(47215-0.12*47215)/10
Balance	43060.08