Question

taylor moore buys and sells real estate. On december 31,2019, her inventory of property included a tract of undeveloped land for which she had paid $900,000. The fair market value of the land was $1,000,000 at that date. How much income should moore report for 2019 in connection with this land?

For each of the following, indicate whether the accounting is correct or incorrect and also, the accounting principle or concept that applies.

1.Gomez company has decided to charge off as a loss the portion of its accounts receivable that it estimates will be uncollectible. the accounts involved resulted from the current year’s of sales.

2.on march 15 of last year, Butler Inc. purchased land for $210,000, on which it planned to construct an office building. At the end of the year, the land had increased in value to $260,000. nevertheless, Butler recognized no income as the result of the increase in value.

3.Three years ago, Nicholson company purchased a machine for $300,000. The machine is expected to have no salvage value. Nevertheless, Nicholson continues to keep the asset’s cost in its accounting records and to depreciate the asset over its nine-year useful life.

Answer 1

Answer:

Taylor Moore

The Land will be reported at $900000 as it is Lower of Cost or Market Value.So the income to be reported would be $0

Gomez company

Following the Matching and Conservatism concept Gomez has correctly charged the estimated uncollectibles to the profit and loss account.

Butler Inc.

As per Historical Cost and Recognition since the Asset is considered at Lower of Cost or Market Value .So Butler is right in not considering in increased Fair value as income since Land will be reported at cost.

Nicholson company

Following the Historical Cost,Matching and Going Concern concept..Assets are shown at cost and depreciated over their useful life .So Nicholson is correct in following the same.