Concept explainers
(a)
Cost concept: This is an accounting concept which states that the actual cost paid in receipt of the asset is the reliable measure and hence assets and services should be recorded at actual cost or historical cost.
To indicate: If the amount at which the land is recorded should be changed according to the appraised value of land
(b)
To indicate: The effect of sale of land for $2,125,000, on the
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Corporate Financial Accounting
- if a company is considering the purchase of a parcel of land that was acquired by the seller for $89,000 is offered for sale at 158,000 is assessed for tax purposes at 99,000 is considered by the purchaser as easily being worth 148,000 and is purchased for 145,000 the land should be recored in the purchaser books at (A. 99,000, B. 145,000, C. 146,500, D. 148,000, E. 158,000)arrow_forwardH6. A business sells real property for $950,000, with $600,000 of this amount being allocated to the building and the remaining $350,000 allocated to the land. The building, the only asset in its Class, had a capital cost of $800,000 and a UCC of $650,000. The adjusted cost base of the land was $250,000. What are the tax consequences of this disposition? A capital gain of $50,000 and a terminal loss of $50,000 © A capital gain of $100,000 and a capital loss of $50,000 C A capital gain of $50,000 and a terminal loss of nil © A capital gain of $100,000 and a terminal loss of $50,000 Please give accurate response Show proper step by step calculationarrow_forwardRussell Corporation sold a parcel of land valued at $400,000. Its basis in the land was $275,000. For the land, Russell received $50,000 in cash in yar 0 and a note providing that Russell will receive $175,000 in year 1 and $175,000 in yar 2 from the buyer. What is Russell’s realized gain on the transaction? What is Russell’s realized gain in year 0, year 1, and year 2?arrow_forward
- a. Land with an assessed value of $750,000 for property tax purposes is acquired by a business for $900,000. Ten years later, the plot of land has an assessed value of $1,200,000 and the business receives an offer of $2,000,000 for it. b. Assuming that the land acquired in (a) was sold for $2;125,000, how would the various elements of the accounting equation be affected? Answer sub-part b alone.arrow_forwardWould you please explain how to find the minimum taxable capital gain to be reported in Year 2? sold capital property in Year 1 for net proceeds of $500,000. The property has an adjusted cost base of $100,000. C received $200,000 at the time of the sale and a note for the balance to be paid in equal annual instalments over the following three years. What is the minimum taxable capital gain to be reported in Year 2?arrow_forwardIs a deduction allowed under the MACRS rules for depreciable real estate (used in a business or held for investment) in the year the property is sold? If so, explain how it is calculated. O A. Yes, a deduction is allowed under the MACRS rules for depreciable real estate in the year the property is sold. It is assumed that the asset is held for the entire year. The amount of depreciation is computed by taking 100% of the annual depreciation. O B. No, there is no deduction allowed under the MACRS rules for depreciable real estate in the year the property is sold. O C. O D. Yes, a is deduction allowed under the MACRS rules for depreciable real estate in the year the property is sold. It is assumed that the asset is held for half the year. The amount of depreciation is computed by taking 6/12's of the annual depreciation. Yes, depreciation for real estate is computed using tables that follow the mid-month convention, so depreciation is allowed in the year of sale. The amount of…arrow_forward
- Russell Corporation sold a parcel of land valued at $425,000. Its basis in the land was $297,500. For the land, Russell received $101,250 in cash in year 0 and a note providing that Russell will receive $226,000 in year 1 and $97,750 in year 2 from the buyer. Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. a. What is Russell's realized gain on the transaction? b. What is Russell's recognized gain in year 0, year 1, and year 2?arrow_forwardBoot Realty LLC receives cash of $75,000 upon completing a Section 1031 exchange. The cash received will be treated as: A long-term gain. Taxable. Reduction in the basis of the replacement property. A deferment until the replacement property is sold. Closing costs payment.arrow_forwardEleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:a. Compute Lynn’s gain recognized on the sale of the warehouse.b. What is the character of this gain?c. How would your answers change if Lynn was a noncorporate business?arrow_forward
- Russell Corporation sold a parcel of land valued at $442,500. Its basis in the land was $274,350. For the land, Russell received $76,500 in cash in year 0 and a note providing that Russell will receive $265,000 in year 1 and $101,000 in year 2 from the buyer. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) a. What is Russell's realized gain on the transaction? b. What is Russell's recognized gain in year 0, year 1, and year 2?arrow_forwardFollowing are descriptions of land purchases in four separate cases. Requireda. Determine the cost used for recording the land acquired in each case.b. Record the journal entry for each case on the date of the land’s acquisition. Note: Round your answers to the nearest whole dollar. Case One 1. At the midpoint of the current year, a $32,000 check is given for land, and the buyer assumes the liability for unpaid taxes in arrears of $800 at the end of last year and those assessed for the current year of $720. a. Determine the cost used for recording the land acquired.Cost of land $Answer b. Record the journal entry on the date of the Account NameDr.Cr. Answer Answer Answer To record land acquisition.arrow_forward