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- In 2005 waste from Flash Limited destroyed a section of Fletcher’s Land. Members of the community demonstrated, and the company restored the land at a cost of $525,000. In 2006 the same section of Fletcher’s Land was destroyed. The Fletcher’s Land Citizens Association submitted an estimate for $680,000 to restore the land. Flash Limited is refusing to pay indicating that Slow Limited, the other company in the community should pay 50% of the restoration costs. In 2005 Slow Limited refused to pay any of the restoration costs. Flash Limited year end is December 31 2006. Indicate the accounting treatment and the disclosure in the financial statements of Flash Limited. Support your answer with the relevant IFRS.1. In November of the current year, an automobile manufacturing company recalled all pickup trucks manufactured during the past two years. A flaw in the battery cable was discovered and the recall provides for replacement of the defective cables. The estimated cost of this recall is $3.7 million. 2. The EPA has notified a company of violations of environmental laws relating to hazardous waste. These actions seek cleanup costs penalties, and damages to property. The company is reasonably certain there will be cost associated with the cleanup, but cannot estimate the amount. The cleanup cost could be as high as $4,170,000 or as little as $670,000 and insurance could reimburse all o part of the cost. There is no way to more accurately estimate the cost to the company at this time. 3. Holland Company does not carry property damage insurance because of the cost. The company has suffered substantial losses each of the past three years. However, it has had no losses for the current year.…Five years ago a consulting engineer purchased a building for company offices constructed of bricks that were not properly fired. As a result, some of the bricks deteriorated from their exposure to rain and snow. Because of the problem with the bricks, the selling price of the building was 25%below the price of comparable, structurally sound buildings. The engineer repaired the damaged bricks and arrested further deterioration by applyingan extra-strength solvent-based RTV elastomeric sealant. This resulted in restoring the building to its fair market value. If the depressed purchase price of the building was $600,000 and the cost of getting it repaired was $25,000, what is the equivalent value of the “forced appreciation” today, if the interest rate is 8% per year?
- Dakota Corporation is an owner/operator of 15 water filtration systems in the Northwestern region of the United States. During February 2022, 4 of the tanks had leaks which contaminated the water and surrounding environment. Dakota is very concerned about their obligation to the community to maintain the environment. Dakota corrected the leaks by installing new water filters and liners which cost $500,000. These corrections will extend the life of the tanks and improve future production. These improvements will also prevent any future environmental contamination. Overall, the $500,000 spent on the new water filters and liners have improved the facility. Dakota is unsure whether the $500,000 spent for this environmental issue should be capitalized or expensed. Accounting Issue: Should Dakota capitalize or expense the $500,000 spent on the new water filters and liners?In janaruary, Prahbu purchased a new machine for use in the existing production line of his manufacturing business for $90,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete and prahbu places the machine in service on the production line. On December 3, prahbu pays another $3,300 to perform periodic qaulity testing after the machine is placed in service. . How much will prahbu be required to capitalize as the cost of the machine.?A PROPERTY THAT IS SUBJECT TO A PARTIAL TAKING IN EMINENT DOMAIN HAS BEEN VALUED AT $60 PER SQUARE FOOT. THE PART THAT IS BEING TAKEN IS BEING USED TO EXPAND A TURN LANE AND NO DAMAGES ARE ANTICIPATED TO THE REMAINDER. THE PART TO BE TAKEN HAS BEEN MEASURED FROM THE NORTHWEST CORNER OF THE PROPERTY ON A RADIUS OF 50 FEET. THE TOTAL PROPERTY MEASURES 100' X 300'. WHAT IS THE COMPENSATION DUE THE OWNER AS A RESULT OF THIS TAKING? $1,800,000 $1,328,760 S471, 240 $117,810
- Jason's company purchases a building on a lot on April 2nd 2002, costing a total of $400,000, that includes all preparatory costs. The building on the lot is worth $150,000. Out of desperation and economic conditions that were outside control, his company then sells the lot and building for $500,000 on January 28th, 2003. Assuming the building is non-residential real property, calculate the MACRS depreciation for 2002 & 2003. Show the working clearly.Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,600,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (20 acres in year one, 31 acres in year two, 23 acres in year three, 11 acres in year four, and 15 acres in year five). Calculate the depletion expense for the next five years. Year 1 Year 2 %$4 Year 3 Year 4 Year 5 Prepare the journal entry for year one. If an amount box does not reguire an entry, leave it blank. 00Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years. According to state environmental laws, Murphy must restore the mine site to its original natural prairie state after it ceases mining operations at the site. To properly account for the mine, Murphy must estimate the fair value of this asset retirement obligation. This amount will be recorded as a liability and added to the value of the mine on Murphy’s books. (You will learn more about these asset retirement obligations in Chapters 10 and 13.) There is no active market for retirement obligations such as these, but Murphy has developed the following cash flow estimates based on its prior experience in mining-site restoration. It will take 3 years to restore the mine site when mining operations cease in 10 years. Each estimated cash outflow reflects an annual payment at the end of each year of the 3-year restoration period. Restoration EstimatedCash Outflow ProbabilityAssessment…
- On January 1, 20x2, Kent Corporation purchased a machine for $50,000. Kent paid shopping expenses of $500 as well as installation costs of $1,200. The machine was estimated to have a useful life of 10 years and estimated salvage value of $3,000. In January 20x3, additions costing $3,600 were made to the machine in order to comply with pollution control ordinances. These additions neither prolonged the life of the machine nor did they have any salvage value. If Kent records depreciation under the straight-line method, depreciation expense for 20x3 is a.$4,870 b.$5,170 c.$5,270 d.$5,570On July 16, 1998, Wyatt Corp. purchased 40 acres of land for $350,000. The land has been held for a future plant site until the current date, December 31, 2016. On December 18, 2016, TexoPete Inc. purchased 40 acres of land for $2,000,000 to be used for a distribution center. The TexoPete land is located next to the Wyatt Corp. land. Thus, both Wyatt Corp. and TexoPete Inc. own nearly identical pieces of land.1. What are the valuations of land on the balance sheets of Wyatt Corp. and TexoPete Inc. using generally accepted accounting principles?2. How might fair value accounting aid comparability when evaluating these two companies?Neptune purchased a new storage facility on April 1, 2021. The new building cost $80,000. A new member of the accounting team recorded depreciation on the new facility using the sum-of-the-years (SYD) method. The manager was impressed with his hard work, since he appropriately used partial year depreciation and used the method correctly. However, she had to remind him Neptune uses the straight line method for buildings. Unfortunately, the mistake in method wasn't corrected before the financial statements were created. Critical Thinking Calculate each of the required ratios using the original values (before any changes) and the updated values (after your changes). At the time of the purchase, the operations manager estimated that the new facility would be used for 5 years and would have a $2,000 salvage value. What are the journal entries for this scenario?