On March 31, 2013, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,000,000 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 |
$ |
100,000 |
|
N/A |
N/A |
|
| Building |
|
500,000 |
|
none |
25 |
|
| Machinery |
|
240,000 |
|
10% of cost |
8 |
|
| Equipment |
|
160,000 |
|
$ |
13,000 |
|
6 |
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 29, 2014, machinery included in the March 31, 2013, purchase that cost $100,000 was sold for $80,000. 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 2013.
| 2. |
Prepare the journal entries to:
a) record the depreciation on the machinery sold on June 29, 2014
b) and the sale of machinery.
|
|