On March 31, 2011, the Herzog Company purchased a factory complete with machinery and equipment.

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Description

On March 31, 2011, 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:

Assets

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 28,2012, machinery included in the March 31,
2011, purchase that cos $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. Compare
depreciation expense on the building, machinery, and equipment for 2011.

2. Prepare
journal entries to record (1) depreciation on the machinery sold on June
29,2012, and (2) the sale of machinery.

3. Compute
depreciation expense on the building, remaining machinery, and equipment for
2012.

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