On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $920,000 to the various types of assets along with estimated useful lives and residual values are as follows: Estimated Useful Life Asset Land Cost Building Equipment Vehicles $ 140,000 420,000 206,000 154,000 Estimated Residual Value N/A none (in years) N/A 25 10% of cost 6 $ 14,000 10 Total $ 920,000 On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $92,000 was sold for $72,000. 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 2024. 2. Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2025, and the sale of equipment. 3. Compute depreciation expense on the building, remaining equipment, and vehicles for 2025.
On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $920,000 to the various types of assets along with estimated useful lives and residual values are as follows: Estimated Useful Life Asset Land Cost Building Equipment Vehicles $ 140,000 420,000 206,000 154,000 Estimated Residual Value N/A none (in years) N/A 25 10% of cost 6 $ 14,000 10 Total $ 920,000 On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $92,000 was sold for $72,000. 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 2024. 2. Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2025, and the sale of equipment. 3. Compute depreciation expense on the building, remaining equipment, and vehicles for 2025.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total
purchase price of $920,000 to the various types of assets along with estimated useful lives and residual values are as follows:
Estimated
Useful Life
Asset
Cost
Land
Building
Equipment
Vehicles
Total
$ 140,000
420,000
Estimated
Residual Value
N/A
none
(in years)
N/A
25
206,000
154,000
10% of cost
$ 14,000
6
10
$ 920,000
On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $92,000 was sold for $72,000. 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 2024.
2. Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2025, and the sale of equipment.
3. Compute depreciation expense on the building, remaining equipment, and vehicles for 2025.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Compute depreciation expense on the building, equipment, and vehicles for 2024.
Note: Do not round intermediate calculations.
Building
Equipment
Vehicles
Depreciation
Expense
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