<u>Answer:</u> The amounts have to be determined using fair value for plant and equipment and for long term debt.
<u>Explanation:</u>
Fair value method is based on the market price of the asset. The historical value of the assets is not used to consider the sale price of the asset. Fair value is where Company J and Company K both the parties have to accept the price based on the known facts of the assets.
Company J and Company K should both accept the price out of free will and should not be out of compulsion. Company J can report based on the financial statement fair value of the assets and long term debt.
Answer:
a. 550,000
Explanation:
The gain on the asset is calculated by the sales proceeds minus the original cost of the asset.
In this question the home' initial cost is $200,000 and it is sold on $750,000. In absence of any unusual or hardship circumstances, the direct gains is $550,000 ( $750,000 - $200,000) as all the closing costs are paid by the buyer, so, Barney ans Betty should include the whole gain of $550,000 in the gross income.
Answer:
Depreciation amount at the end of one year is $10,900
Explanation:
Land is not depreciated because land is assumed to have an unlimited useful life. Building is a long lived assest and it has limited useful lives. Therefore, building is depreciated assets.
The building acquisition cost is = Building transaction value + building transfer costs + Renovation cost
= $88,000 + $4,000 + $25,000
= $117,000
Depreciation value = The building acquisition cost - The residual value
= $117,000 - $8,000
= $109,000
Depreciation amount under the Straight-line method is calculated as below:
Yearly depreciation = 
= 
= $10,900
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