Reference no: EM132824167
Tri-Harder, Inc, a triathlon training company, purchased a new location on February 1, 20x0. They paid $630,000 in cash for the land, a building containing an indoor swimming pool and a cycling studio, and 20 training bikes. The fair value of the land, the building (including the pool and cycling studio), the bikes is $240,000, $400,000 and $30,000, respectively. In addition to the purchase price, they paid $12,000 in back taxes, $3,000 for demolition of an old shed, $7,000 in attorney fees. The building is to be depreciated based on a 20-year useful life using the straight-line sum of the years digits method and a $100,000 salvage value. The bikes are to be depreciated using the straight-line method triple declining balance, a 4-year useful life and a $2,000 salvage value.
On February 1, 20x0, they also took out a construction loan for $80,000 to be paid in 5-years, with semi-annual interest paid each June 30 and December 31 at a rate of 5%. Bonds of similar risk are yielding 9%. The track begins construction on March 1 and is completed on June 30. Tri-harder makes payments for the track of: $35,000 on March 15th, $60,000 on April 15th, $18,000 on May 30th, and $52,000 on June 30th. Tri-harder has two other outstanding loans during the entirety of 20x0: a $200,000, 8% loan and a $500,000 12% loan. The track is estimated to have an 8-year useful life and is to be depreciated using straight-line and no residual value.
Question 1: Record the depreciation expense for the building, bikes, and track as of December 31, 20x0.
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