[The following information applies to the questions displayed below.]

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.

-Assume that Harding uses the units-of-production method when depreciating its equipment.Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has a salvage value of $34,000.Harding produced 265,000 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)$193,450
B)$125,200
C)$157,145
D)$165,890

Question

[The following information applies to the questions displayed below.]

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.

-Assume that Harding uses the units-of-production method when depreciating its equipment.Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has a salvage value of $34,000.Harding produced 265,000 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)$193,450
B)$125,200
C)$157,145
D)$165,890

Quizplus · Accepted Answer

Total market value of all assets acquired = $374,000 + $1,100,000 + $726,000 = $2,200,000
Allocation to equipment = Purchase price of $1,900,000 × ($726,000 ÷ $2,200,000)= $1,900,000 × 33% = $627,000
Depreciation expense = [(Cost of $627,000 - Salvage value of $34,000)÷ Estimate of 1,000,000 units] × Units produced of 265,000 units = $157,145

[The Following Information Applies to the Questions Displayed Below