Redlands Inc. made the following investments on January 1, 2020, its first year of business: Expected Life Cost Allocation Item Cost Warehouse $100 20 years Straight-line Machine 60 10 years Double-declining Patent 20 5 years Straight-line Invest in stock* 10 Indefinite Not applicable * Rancho's stock had a fair (market) values of $8 and $7 on December 31, 2020 and December 31, 2021, respectively.
Redlands Inc. made the following investments on January 1, 2020, its first year of business: Expected Life Cost Allocation Item Cost Warehouse $100 20 years Straight-line Machine 60 10 years Double-declining Patent 20 5 years Straight-line Invest in stock* 10 Indefinite Not applicable * Rancho's stock had a fair (market) values of $8 and $7 on December 31, 2020 and December 31, 2021, respectively.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Redlands Inc. made the following investments on January 1, 2020, its first year of business:
Item
Cost
Expected Life Cost Allocation
Warehouse $100
20 years
Straight-line
Machine
60
10 years
Double-declining
Patent
20
5 years
Straight-line
Invest in stock*
10
Indefinite
Not applicable
* Rancho's stock had a fair (market) values of $8 and $7 on December 31, 2020 and December 31,
2021, respectively.
Required (B):
1. Compute the gain or loss on the sale of the warehouse if Redlands sold it for $111l on January 1,
2021.
2. Compute the impairment loss on the machine if Redlands determined it had a fair value of $45 on
January 1, 2021.
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