On March 31 2018 the ABC Company purchased a factory complet

On March 31, 2018, the ABC Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,030,000 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

$

115,000

N/A

N/A

Building

530,000

none

20

Machinery

210,000

12% of cost

8

Equipment

175,000

  

$

14,000

4

Total

$

1,030,000

On June 29, 2019, machinery included in the March 31, 2018, purchase that cost $103,000 was sold for $83,000. ABC 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 2018.
2. Prepare the journal entries to record the depreciation on the machinery sold on June 29, 2019, and the sale of machinery.
3. Compute depreciation expense on the building, remaining machinery, and equipment for 2019.
  

Please provide detailed steps/formulas used to calculate all values.

Asset	Cost		Estimated Residual Value		Estimated Useful Life in Years
Land	$	115,000				N/A		N/A
Building		530,000				none		20
Machinery		210,000				12% of cost		8
Equipment		175,000			$	14,000			4
Total	$	1,030,000

Solution

Building Straight line method = (530000-0) / 20 26500 2018 26500*9/12 19875 2019 26500*12/12 26500 Machinery Straight line method = (210000-25200)/8 23100 2018 23100*9/12 17325 Straightline method = (107000- 12840)/8 11770 2019 11770*12/12 11770 Equipment Sum of digits method = (175000-14000) *4/10 64400 2018 64400*9/12 48300 Sum of digits year 2 = (175000-14000) * 3/10 48300 2019 64400*3/12 16100 48300*9/12 36225 Depreciation for 2019 52325 Journal entry Cash 83000 accumulated depreciation 14162.5 (103000-12360)*15/96 Loss on sale of machinery 5837.5               Machinery 103000