Question

20. Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,235,000. Harding paid $280,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $296,000; Building, $880,000 and Equipment, $584,000. (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 1,030,000 units over its 5-year useful life and has salvage value of $17,000. Harding produced 268,000 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? a) $151,953 b) $79,099 c) $101,619 d) $147,530

Answer 1

Answer-
Depreciation Expense that Harding will record in the first year will be   (c) $1,01,619
Working
Total Cost of the property bought	$ 12,35,000.00
Property consists of
Land	$   2,96,000.00
Building	$   8,80,000.00
Equipment	$   5,84,000.00
Total value of the property	$ 17,60,000.00
Values to be recorded in books	Amount(in $)	Percentage of total Value
Land	$   2,09,950.00	17%
Building	$   6,17,500.00	50%
Equipment	$   4,07,550.00	33%
Total	$ 12,35,000.00	100%
Depreciation under unit pf production method
Depreciation= ( Original value- Salvage value)/estimated production* actual units produced
=(407550-17000)/1030000*268000
=101619