Question
On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $940,000 to
On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $940,000 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 | $ 130,000 | N/A | N/A |
Building | 440,000 | none | 25 |
Equipment | 240,000 | 12% of cost | 8 |
Vehicles | 130,000 | $ 13,000 | 10 |
Total | $ 940,000 |
On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $94,000 was sold for $74,000. 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:
- Compute depreciation expense on the building, equipment, and vehicles for 2024.
- Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2025, and the sale of equipment.
- Compute depreciation expense on the building, remaining equipment, and vehicles for 2025.
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