Himani Bansal_119717239_BAN120 Case Analysis

2 While developing a new product line, Cook Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the project, so the building is available for sale or for a new product. Cook owns the building free and clear?there is no mortgage on it. Which of the following statements is CORRECT? Answer If the building could be sold, then the after-tax proceeds that would be generated by any such sale should be charged as a cost to any new project that would use it. This is an example of an externality, because the very existence of the building affects the cash flows for any new project that Rowell might consider. Since the building was built in the past, its cost is a sunk cost and thus need not be considered when new projects are being evaluated, even if it would be used by those new projects. If there is a mortgage loan on the building, then the interest on that loan would have to be charged to any new project that used the building.…

AG also owns a building which it bought in 2010 at a cost of $1.3 million. The current market price of the building is $3.0 million. AG management argues that we should not charge depreciation on the building because the asset has appreciated in value, not depreciated.  What is your advice to AG? Justify your answer.

Brittany purchased a building for $320,000 on January 1, 2013. The purchase price does not include land. (Use Table 6A-6 and Table 6A-8) Required: Calculate the cost recovery for 2013 and 2021 if the real property is Residential real property. A warehouse. Note: For all requirements, round your final answers to the nearest whole dollar amount.

Rowell Company spent $3 million two years ago to build a plant for a new project. It then decided not to go forward with the project, so the building is available for sale or for other new projects. Rowell owns the building free and clear--there is no mortgage on it. Which of the following statements is CORRECT? a. If there is a mortgage loan on the building, then the interest on that loan would have to be charged to any new project that used the building. b. This is an example of an externality, because the very existence of the building affects the cash flows for any new project that Rowell might consider. c. Since the building was built in the past, its cost is a sunk cost and thus need not be considered when new projects are being evaluated, even if it would be used by those new projects. d. If the building could be sold, then the after-tax proceeds that would be generated by any such sale should be charged as an opportunity cost to any new project that would use it.

Tromp Limited is an investment company that purchases buildings and holds them for a number of purposes, such as resale, leasing and its own use.  On 1 January 2014, Tromp Limited purchased an old building, Tromp Towers, for R300 000. Conveyancer’s fees amounted to R 20 000.  This building is situated in an isolated part of Durban (South Africa) and there is no development anywhere nearby. At the time of purchase, there had been no property transactions in this area for many years and the possibility of leasing the building to tenants was remote. During November 2014, development began of a new industrial park in the area. As a result, the building was able to be leased to tenants involved in the development of the industrial park. Due to the influx of people into the area, the directors decided to paint one side of the building with the corporate logo of Tromp Limited.  This building has never had an air-conditioning system. After numerous complaints from tenants about not being able…

Pat’s investment real estate was condemned on November 14, 2016. On February 14, 2017, he received $250,000 for the property that had a basis of $210,000. What is the last date that Pat can acquire replacement property to avoid gain recognition? a. November 14, 2019 b. February 14, 2020 c. December 31, 2019 d. December 31, 2020 e. None of the above

Answer the question based on what you have learned on a legal basis. Facts: You offered to sell your automobile to Wil for P100,000.00. After inspecting the automobile, Wil offered to buy it for P80,000.00. This offer was accepted by you. The next day, you offered to deliver the automobile, but Wil being short of funds, secured postponement of the delivery, promising to pay the price “upon arrival of the steamer". The steamer however never arrived because it was wrecked by a typhoon and sank somewhere off the Coast of Samar. Question: Is there a perfected contract in this case? Why or why not? Answer:

Tromp Limited is an investment company that purchases buildings and holds them for a number of purposes, such as resale, leasing and its own use.   On 1 January 2014, Tromp Limited purchased an old building, Tromp Towers, for R300 000. Conveyancer’s fees amounted to R 20 000.   This building is situated in an isolated part of Durban (South Africa) and there is no development anywhere nearby. At the time of purchase, there had been no property transactions in this area for many years and the possibility of leasing the building to tenants was remote.   During November 2014, development began of a new industrial park in the area. As a result, the building was able to be leased to tenants involved in the development of the industrial park. Due to the influx of people into the area, the directors decided to paint one side of the building with the corporate logo of Tromp Limited.   This building has never had an air-conditioning system. After numerous complaints from tenants about not being…

(Multiple Choice Question) Vanessa recently paid $200,000 cash to purchase both a building and equipment. The fair market value of the building is $180,000, and the fair market value of the equipment is $40,000. When recording this purchase, Vanessa should   1. None of the answers are correct   2. Credit Cash for $200,000 and Credit Mortgage Payable for $20,000   3. Debit Building for $198,000 and Equipment for $44,000   4. Debit Building for $180,000 and Equipment for $40,000   5. Debit Building for $163,636.36 and Equipment for $36,363.64

Selling a plant, income taxes. (CMA, adapted) The Cook Company is a national portable building manufacturer. Its Benton plant will become idle on December 31, 2017. Mary Carter, the corporate controller, has been asked to look at three options regarding the plant:

a) Brittany purchased a building for $160,000 on January 1, 2013. The purchase price does not include land. (Use Table 6A-6 and Table 6A-8) Required: Calculate the cost recovery for 2013 and 2021 if the real property is: Residential real property. A warehouse. Note: For all requirements, round your final answers to the nearest whole dollar amount.   b) Brittany purchased a building for $160,000 on January 1, 2013. The purchase price does not include land. (Use Table 6A-6 and Table 6A-8) Required: Calculate the cost recovery for 2013 and 2021 if the real property is: Residential real property. 2013 ? 2021 ? A warehouse. 2013 ? 2021 ? Note: For all requirements, round your final answers to the nearest whole dollar amount. Pleease don't answer in hand written thanku

Three years ago Yeagley and Sons purchased the three assets listed in the following table. The chief financial officer, Kathy Dillon, is presently trying to decide what to do with each asset. She has three choices for each asset: (1) sell it, (2) sell it and replace it with an equivalent asset, or (3) keep it. The following information is provided to aid her decision. Asset Original Cost Replacement Cost Fair Market Value  Present Value of Future Cash Flows Produced by Old Asset Present Value of Future Cash Flows of Equivalent Asset A 4000 1000 1500 2500 5000 B 1500 2000 500 2500 3500 C 2000 3500 3000 2500 5000 REQUIRED:a. Assuming that Kathy chooses to keep Asset A and Asset B and sell and replace Asset C,evaluate her decisions. What decisions should she have made? Support your choices.b. How useful was the original cost of each asset in the evaluation of Kathy’s decisions?c. Assume that Kathy proceeds with her decisions. According to generally accepted accounting…

On January 1,2014 the Mayfair Company has machinery on the books that originally cost $100,000. It sold the machine and recorded a $1,000 gain. Which of the following is true? Multiple Choice   Mayfair sold the asset for less than its book value   Mayfair sold the asset for more than its book value   Mayfair sold the asset at book value   Mayfair violated GAAP.   None of the other alternatives are correct

Due to growing financial difficulties, Onion Bank was unable to finish construction of its  21-storey building on a prime lot located in Makati City. Thus,  the Bangko Sentral ordered the closure of Onion Bank and, consequently, placed it under receivership. In a bid to save the bank’s property investment, the President of Onion Bank entered into  a  financing  agreement  with  a  group  of  investors  for  the  completion  of  the construction  of  the  21-storey  building  in  exchange  for  a  ten-year  lease  and  the exclusive option to purchase the building.Is the act of the President valid? Why or why not? (Please explain thoroughly and cite related and appropriate articles)

Phil Dunphy, a real estate agent, is considering whether he should list an unusual $516,464 house for sale. If he lists it, he will need to spend $3,787 in advertising, staging, and fresh cookies. The current owner has given Phil 6 months to sell the house. If he sells it, he will receive a commission of $21,213. If he is unable to sell, the house, he will lose the listing and his expenses. Phil estimates the probability of selling this house in 6 months to be 28%. What is the expected profit on this listing?

Phil Dunphy, a real estate agent, is considering whether he should list an unusual $393,668 house for sale.  If he lists it, he will need to spend $4,295 in advertising, staging, and fresh cookies.  The current owner has given Phil 6 months to sell the house.  If he sells it, he will receive a commission of $16,068.  If he is unable to sell the house, he will lose the listing and his expenses.  Phil estimates the probability of selling this house in 6 months to be 25%.  What is the expected profit on this listing?   Your Answer: