Question

On March 31, 2021, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $1,020,000 to the various types of assets along with estimated useful lives and residual values are as follows: Asset Land Building Equipment Vehicles Total Cost $ 110,000 520,000 220,000 170,000 $1,020,000 Estimated Residual Value N/A none 12% of cost $14,000 Estimated Useful Life (in years) N/A 25 10 On June 29, 2022, equipment included in the March 31, 2021, purchase that cost $102,000 was sold for $82,000. 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. Complete this question by entering your answers in the tabs below. Required Required Required 1 | 2 | 3 Compute depreciation expense on the building, equipment, and vehicles for 2021. (Do not round intermediate calculations.) Depreciation Expense Building Equipment Vehicles Required 1 Required 2 >

Answer 1

1	Computation of Depreciation
Particulars	Cost of asset	Residual value	Estimated useful life	Depreciation for 2021
Building	520,000	-	25	[(5,20,000-0)/25]*9/12 = 15,600
Equipment	220,000	26,400	10	[(2,20,000-26,400)/10]*9/12 = 14,520
Vehicles (W.N 1)	170,000	14,000	10	(1,70,000*20%)*9/12 = 25,500
	910,000
2	Journal Entry to record the sale of equipment
	Cost of asset on 31-03-2021 = 1,02,000
	salvage value = 102,000*12% = 12,240
	Depreciation for 2021 = [(102,000-12,240)/10]*(9/12) = 6,732
	Depreciation upto date of sale = [(102,000-12,240)/10]*(6/12) = 4,488
June 22, 2022	Depreciation a/c Dr			4,488
	To Accumulated Depreciation a/c				4,488
	(Being depreciation upto date of sale is accounted)
June 22, 2022	Cash / Bank a/c Dr			82,000
	Loss on sale of Equipment a/c Dr			8,780
	Accumulated Depreciation a/c Dr			11,220
	To Equipment a/c				102,000
3	Depreciation Expense on building, remaining equipment and vehicles
Particulars	Cost of asset	Residual value	Estimated useful life	Depreciation for 2021
Building	520,000	-	25	[(5,20,000-0)/25] = 20,800
Equipment	118,000	14,160	10	[(1,18,000-14,160)/10] = 10,384
Vehicles (W.N 1)	170,000	14,000	10	(1,70,000-25,500)*20% = 28,900
	808,000