On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $1,070,000 to the various types of assets along with estimated useful lives and residual values are as follows: Asset Land Building Equipment Vehicles Total Cost $ 135,000 570,000 170,000 195,000 $ 1,070,000 Estimated Residual Value N/A none 12% of cost $ 15,000 Estimated Useful Life (in years) N/A 20 8 10 On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $107,000 was sold for $87,000. 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.
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.
![On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total
purchase price of $1,070,000 to the various types of assets along with estimated useful lives and residual values are as follows:
Asset
Land
Building
Equipment
Vehicles
Total
Cost
$ 135,000
570,000
170,000
195,000
$ 1,070,000
Estimated
Residual Value
N/A
none
12% of cost
$ 15,000
Estimated
Useful Life
(in years)
N/A
20
On June 29, 2025, equipment included in the March 31, 2024, purchase that cost $107,000 was sold for $87,000. 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 Required 2 Required 3
Building
8
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.
10
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Depreciation
Expense
Compute depreciation expense on the building, equipment, and vehicles for 2024.
Note: Do not round intermediate calculations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa454c8d9-8113-4596-aba6-6b9ead294dd4%2Fc0f87b03-4a06-404c-b56f-5f0845c749a3%2Fc6aeh7m_processed.png&w=3840&q=75)
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