Question

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,375,000. Harding paid $700,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $740,000; Building, $2,200,000 and Equipment, $1,460,000. (Round your intermediate percentages to the nearest whole number: i.e 0.054231 = 5%. Do not round any other intermediate calculations.)

Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,150,000 units over its 5-year useful life and has salvage value of $19,000. Harding produced 280,000 units with the equipment by the end of the first year of purchase.

Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year?

Answer 1

	Appraised value	% of total
Land	740000	17%
Building	2200000	50%
Equipment	1460000	33%
Total	4400000
Cost allocated to Equipment	783750	=2375000*33%
Cost of Equipment	783750
Less: Salvage value	19000
Depreciable cost	764750
Divide by Total units	1150000
Depreciation per unit	0.665
Units in first year	280000
X Depreciation per unit	0.665
Depreciation expense in the first year	186200