Question

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,995,000. Harding paid $560,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $592,000; Building, $1,760,000 and Equipment, $1,168,000. (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 1,110,000 units over its 5-year useful life and has salvage value of $18,000. Harding produced 276,000 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

	Fair values	% of Fair values	Purchase price	Cost allocated
Land	592000	17%	1995000	339150
Buidling	1760000	50%	1995000	997500
Equipment	1168000	33%	1995000	658350
Total	3520000			1995000
Cost of Equipment	658350
Less: Salvage value	18000
Depreciable cost	640350
Divide by Total units	1110000
Depreciation per unit	0.58
Units in first year	276000
X Depreciation per unit	0.58
Depreciation expense for the equipment	159222