<u>Solution:</u>
1. It is given that capital contribution on year 1 is $120,000. Loss allocation is $40,000. It is equal. Depreciation is allocated on the basis of 80:20. Thus, depreciation expense of $36,000 is allocated as $28,800 and $7,200. They all are added. Therefore, basis on the end of year 1 is $51,200 and $72,800. Income allocation on year 2 is $20,000. Depreciation allocation on year 2 is also allocated same with $57,600. It is $46,080 and $11,520. Therefore, basis on the end of year 2 is $25,120 and $81,280. No losses were suspended for any partner. As there is no loss beyond partner’s tax basis it is not suspended.
2. It is true that the allocations on the agreement of partnership have “economic effect”. Given gains, income or any losses are reflected through their allocation in the balance of capital accounts. Capital balances that are deficit must be restored and capital accounts balance on end should be in accordance with liquidating distributions.
Question Completion:
A building owned by Hopewell Company was recently valued at $850,000 by a real estate expert.
Answer:
Book Value and Fair Value
There is a difference between the book value and the fair value of an asset. The book value is based on the asset's historical cost. The fair value is the current market price of the asset. In reporting long-term assets, the acceptable basis is the historical cost or the cost of acquiring the asset. This cost is further reduced by annual depreciation charges. The fair value is not often the acceptable basis for reporting long-term assets unless the entity is no longer a going concern or the asset has suffered an impairment loss.
Explanation:
a) Data and Calculation:
Fair value by a real estate expert = $850,000
Book value (historical cost) = $550,000
Difference between fair value and book value = $300,000
I am not sure if this is correct but I think is was DC itself. :-\
<span>No, the company has not lived up to it's reputation. The predicted time is 3.15. The margin for error is 3.15+/- 3%, which gives an upper limit of 1.03 * 3.15 = 3.25. 3.26 is higher, i.e. later, than 3.25.</span>
Answer:
c. Accrue revenue by making an adjusting entry at the end of the period
Explanation:
As in the given situation since it is mentioned that the service is earned but not yet billed or collected so here the revenue is accrued so that the revenue could be recorded by recording the adjusting entry and there is an account receivable at the closing of the period.
Therefore according to the given options, the option c is correct and the same is to be considered