On December 31, 20X1, management of Plexion Corporation committed to a plan for selling an office building and its related equipment that were, prior to December 31, 20X1, in productive use and classified as Non-Current Assets. Both assets are available for immediate sale. The building has a carrying amount (i.e. net book value) of $838,000 and a fair value less cost to sell of $938,000. The equipment has a carrying amount (i.e. net book value) of $316,000 and a fair value less cost to sell of $238,000. Required: Calculate the amount that each asset will be reported at on the Statement of Financial Position and the amount of any gain or loss that will be reported in the Profit and Loss Statement for the year ended December 31, 20X1. Note: Management expects to sell both assets in 20X2.

On December 31, 20X1, management of Plexion Corporation committed to a plan for selling an office building and its related equipment that were, prior to December 31, 20X1, in productive use and classified as Non-Current Assets. Both assets are available for immediate sale. The building has a carrying amount (i.e. net book value) of $838,000 and a fair value less cost to sell of $938,000. The equipment has a carrying amount (i.e. net book value) of $316,000 and a fair value less cost to sell of $238,000. Required: Calculate the amount that each asset will be reported at on the Statement of Financial Position and the amount of any gain or loss that will be reported in the Profit and Loss Statement for the year ended December 31, 20X1. Note: Management expects to sell both assets in 20X2.

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter15: Property Transactions: Nontaxable Exchanges

Section: Chapter Questions

Problem 46P

See similar textbooks

Similar questions

On December 31, 20X1, management of Plexion Corporation committed to a plan for selling an office building and its related equipment that were, prior to December 31, 20X1, in productive use and classified as Non - Current Assets. Both assets are available for immediate sale. The building has a carrying amount (i.e. net book value) of $814,000 and a fair value less cost to sell of $914,000.• The equipment has a carrying amount (i.e. net book value) of $268,000 and a fair value less cost to sell of $214,000. Required: Calculate the amount that each asset will be reported at on the Statement of Financial Position and the amount of any gain or loss that will be reported in the Profit and Loss Statement for the year ended December 31, 20X1. Note: Management expects to sell both assets in 20X 2.
Falcon Waste Management purchased land and a warehouse for $650,000. In addition to the purchase price, Falcon made the following expenditures related to the acquisition: broker's commission, $35,000; title insurance, $5,500; miscellaneous closing costs, $8,500. Assume that Falcon decides to use the warehouse rather than demolish it. An independent appraisal estimates the fair values of the land and warehouse at $637,500 and $112,500, respectively. Determine the amounts Falcon should capitalize as the cost of the land and the building. Answer is not complete. Capitalized cost of land Capitalized cost of building
On December 1, 2018, Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. On December 31, 2018, the plant had not been sold but, due to a shortage of this type of plant, there had been an increase in the fair value to P360,000 while expected costs to sell remain at P10,000. Case 1: Any gain on the subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: a. The gain should be recognized in full. b. The gain should not be recognized. c. The gain should…
On December 31, 2022, ALR, Inc. classified one of its plant assets (land) as held for sale. The carrying value of the land as of that date was $2,000,000. The fair value less selling costs on that date was $1,800,000. As of December 31, 2023, the company had not sold the asset, so it was still classified as held for sale. fair value net of selling costs as of December 31, 2023, was $2,050,000. Based on this information, indicate how ALR should report the asset on the December 31, 2022, and December 31, 2023, balance sheets. Prepare any journal entries required. Begin by recording the journal entry to reclassify the land held for sale on December 31, 2022. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.) Аccount December 31. 2022 Now, record the journal entry to write down the asset on December 31, 2022.…
Samtech Manufacturing purchased land and building for $3 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: $35,000 9,500 55,000 5,900 Title insurance Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.6 and $1.2 million, respectively. Shortly after acquisition, Samtech spent $101,000 to construct a parking lot and $59,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $440,000 and the salvaged materials were sold for $7000. In addition, Samtech spent $98,000 clearing and grading the land in preparation for the…
Samtech Manufacturing purchased land and a building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: Title insurance. Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees $ 25,000 9,500 45,000 4,900 An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $2 million, respectively. Shortly after acquisition, Samtech spent $91,000 to construct a parking lot and $49,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $340,000 and the salvaged materials were sold for $5,500. In addition, Samtech spent $88,000 clearing and grading the land in preparation for the…
On January 1,2020 Petron Company purchased an oil tanker depot at the cost of P 7,000,000 the entity is expected to operate the depot for five years, after which it is legally required to dismantle the depot and remove the underground storage tanks. The oil tanker depot is depreciated using the straight line method with no residual value. It is reliably estimated that the cost of decommissioning the depot will amount to P 1,500,000. The appropriate Discount rate is 10%. The present value of 1 at 10% for five period is 0.62. At the beginning of 2022, the entity reliably estimated that the carrying amount of decommissioning liability is P 120,000 under what it should be. The discount rate remains at 10%. On December 31,2024 after 5 years of operating the entity paid a demolition entity to dismantle the depot at a price of P 1,700,000 Required: Prepare all the required Journal Entries from January 1,2020 up to December 31,2024 At
Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. The plant has been depreciated at an amount of P5,000 per month. On December 31, 2016, the plant had not been sold but, due to a shortage of this type of plant, there had been an increase in the fair value to P360,000 while expected costs to sell remain at P10,000.If Joy Corporation sold the plant on March 1, 2017 for a net proceeds of P351,000, what amount should be included as gain on disposal in the…
On January 1, 20x1, ABC Co. decided to lease out a building that was previously used as office space. The building has a historical cost of P 5,000,000 and accumulated depreciation of P 4,000,000. ABC Co. uses the fair value model for its investment property. The building has a fair value of P 800,000 on January 1, 20x1. What amount shall be recognized in the statement of financial performance on January 1, 20x1?
On January 1, 2020, Diluc acquired land for a cost of P3,000,000 and a building costing P6,000,000.The building has a useful life of 6 years with no residual value. The land and building were properlyincluded under the caption of “Property Plant and Equipment”.On July 1, 2020 due to management decisions, the land and building qualified as “Held for sale” underIFRS 5 provisions on the same date the land had a fair value less cost to sell of P2,500,000, and thebuilding P5,300,000. The fair value less cost to sell of the land and building remained the same untilDecember 31, 2020.Requirements:1. What amount of assets must be presented in the December 31, 2020 financial statements fromthe foregoing events?2. What amount of depreciation expense was recorded in 2020?
Godo
Barbosa Ltd purchased an item of plant for GHS 300,000 which was to be depreciated over its useful life of 10 years. On 1 January 20X5, the plant was revalued to its fair value of GHS 600,000, with no revision to its remaining useful life. On 1 January 20X6, the plant was sold for GHS 700,000. In accordance with IAS 16 Property, Plant and Equipment, what was the profit on disposal to be included in Barbosa Ltd's income statement for the year ended 31 December 20X6?