Wildhorse Company purchased land and a building on January 1, 2022. Management's best estimate of the value of the land was $130,000 and of the building $260,000. However, management told the accounting department to record the land at $286,000 and the building at $104,000. The building is being depreciated on a straight-line basis over 15 years with no salvage value. Calculate the annual change in net income $ Why do you suppose management requested this accounting treatment? Is it ethical? It is likely that management requested this accounting treatment and this practice is
Wildhorse Company purchased land and a building on January 1, 2022. Management's best estimate of the value of the land was $130,000 and of the building $260,000. However, management told the accounting department to record the land at $286,000 and the building at $104,000. The building is being depreciated on a straight-line basis over 15 years with no salvage value. Calculate the annual change in net income $ Why do you suppose management requested this accounting treatment? Is it ethical? It is likely that management requested this accounting treatment and this practice is
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Wildhorse Company purchased land and a building on January 1, 2022. Management's best estimate of the value of the land was
$130,000 and of the building $260,000. However, management told the accounting department to record the land at $286,000 and
the building at $104,000. The building is being depreciated on a straight-line basis over 15 years with no salvage value.
Calculate the annual change in net income $
Why do you suppose management requested this accounting treatment? Is it ethical?
It is likely that management requested this accounting treatment
and this practice is
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