Balter Inc.acquired Jersey Company on January 1, 2016.When the purchase occurred Jersey Company had the following information related to fixed assets:
$$\begin{array} { l r }
\text { Land } & \$ 80,000 \
\text { Building } & 200,000 \
\text { Accumulated Depreciation } & ( 100,000 ) \
\text { Equipment } & 100,000 \
\text { Accumulated Depreciation } & ( 50,000 )
\end{array}$$ The building has a 10-year remaining useful life and the equipment has a 5-year remaining useful life.The fair value of the assets on that date were:

$$\begin{array} { l r }
\text { Land } & \$ 100,000 \
\text { Building } & 130,000 \
\text { Equipment } & 75,000
\end{array}$$ What is the 2016 depreciation expense Balter will record related to purchasing Jersey Company
A)$8,000
B)$15,000
C)$28,000
D)$30,000

Question

Balter Inc.acquired Jersey Company on January 1, 2016.When the purchase occurred Jersey Company had the following information related to fixed assets: 
$$\begin{array} { l r } 
\text { Land } & \$ 80,000 \
\text { Building } & 200,000 \
\text { Accumulated Depreciation } & ( 100,000 ) \
\text { Equipment } & 100,000 \
\text { Accumulated Depreciation } & ( 50,000 )
\end{array}$$ The building has a 10-year remaining useful life and the equipment has a 5-year remaining useful life.The fair value of the assets on that date were:

$$\begin{array} { l r } 
\text { Land } & \$ 100,000 \
\text { Building } & 130,000 \
\text { Equipment } & 75,000
\end{array}$$ What is the 2016 depreciation expense Balter will record related to purchasing Jersey Company
A)$8,000
B)$15,000
C)$28,000
D)$30,000

Quizplus · Accepted Answer

The 2016 depreciation expense is calculated based on the fair value of the assets at the time of acquisition. The building, with a fair value of $130,000 and a 10-year remaining life, will have an annual depreciation of $13,000 ($130,000 / 10 years). The equipment, with a fair value of $75,000 and a 5-year remaining life, will have an annual depreciation of $15,000 ($75,000 / 5 years). Adding these together, the total depreciation expense for 2016 is $28,000 ($13,000 + $15,000).

Balter Inc The Building Has a 10-Year Remaining Useful Life and the Occurred