1- Omar Corporation paid $300,000 for a tract of land that had an old gas station on it. The gas station was demolished at a cost of $20,000 and a new warehouse was constructed on the site at a cost of $550,000.

In addition, several other costs were incurred:

Legal fees (associated with the purchase of the land)	$45,000
Architect fees (associated with the new warehouse)	$50,000
Interest on the construction loan (for the new warehouse)	$24,000

(a) What value should be assigned to the tract of land?

$Answer

(b) What value should be assigned to the new warehouse?

2- Swift Trucking Company purchased a long-haul tractor-trailer for $600,000 at the beginning of the year. The expected useful life of the tractor-trailer rig was 8 years or 500,000 miles.

Salvage value was estimated to be $80,000. During the first 5 years of use, the rig logged the following usage in miles:

Year 1	80,000	miles
Year 2	75,000	miles
Year 3	80,000	miles
Year 4	76,000	miles
Year 5	60,000	miles
Total	371,000	miles

Calculate the depreciation expense to be taken on the tractor-trailer for each year using:

(a) Units-of-production method

Round your answer to the nearest whole number.

Year	Depr exp
1	Answer
2	Answer
3	Answer
4	Answer
5	Answer
Total	Answer

(b) Straight-line method

Round your answer to the nearest whole number.

Year	Depr exp
1	Answer
2	Answer
3	Answer
4	Answer
5	Answer
Total	Answer

Which method gives you higher total depreciation charges over the five-year period?

AnswerUnits-of-production methodStraight-line method