6.Hal owns a small piece of land that the company acquired five years ago for $15K. Explain whyor why not the balance sheet value of the land is an appropriate gauge of the fair market valueof the land today_ Hal's Ice Cream Stands$ ThousandsAssetsCash and cash equivalentsAccounts receivableInventoriesTotal Current AssetsEquipmentLess accumulated depreciationLand HoldingsTotal AssetsLiabilities & Shareholders' EquityAccounts PayableShort-term DebtTotal Current LiabilitiesLong-Term DebtTotal LiabilitiesShareholders' EquityLiabilities & Shareholders' EquityHal's Income Statement for the Year Ending12/31/2021($ 000s except for earnings per share)SalesCost of Goods SoldPayroll and employee benefitsGross Operating ProfitSelling, general and administrative expensesIncome from OperationsInterest expenseIncome taxesNet IncomeEarnings per share of common stock ($)2021$1005075$225300(5)15$53520050250100350???$535$500100200200100100520$75$0.25

1. Fair market value (FMV) is the price a product would sell for on the open market assuming that…

Hal owns a small piece of land that the company acquired five years ago for $15K. Explain why or why not the balance sheet value of the land is an appropriate gauge of the fair market value of the land today_

Hal owns a small piece of land that the company acquired five years ago for $15K. Explain why or why not the balance sheet value of the land is an appropriate gauge of the fair market value of the land today_

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

6.
Hal owns a small piece of land that the company acquired five years ago for $15K. Explain why
or why not the balance sheet value of the land is an appropriate gauge of the fair market value
of the land today_

Hal's Ice Cream Stands
$ Thousands
Assets
Cash and cash equivalents
Accounts receivable
Inventories
Total Current Assets
Equipment
Less accumulated depreciation
Land Holdings
Total Assets
Liabilities & Shareholders' Equity
Accounts Payable
Short-term Debt
Total Current Liabilities
Long-Term Debt
Total Liabilities
Shareholders' Equity
Liabilities & Shareholders' Equity
Hal's Income Statement for the Year Ending
12/31/2021
($ 000s except for earnings per share)
Sales
Cost of Goods Sold
Payroll and employee benefits
Gross Operating Profit
Selling, general and administrative expenses
Income from Operations
Interest expense
Income taxes
Net Income
Earnings per share of common stock ($)
2021
$100
50
75
$225
300
(5)
15
$535
200
50
250
100
350
???
$535
$500
100
200
200
100
100
5
20
$75
$0.25

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