question archive Assume that a company buys land with a building on it for $1,500,000
Assume that a company buys land with a building on it for $1,500,000
Subject:AccountingPrice: Bought3
Assume that a company buys land with a building on it for $1,500,000.
At the time of purchase the company planned to tear the old building down and build a new building. The cost to tear down and dispose of the old building was $150,000 and they sold some material for $25,000. The cost to build the new building was $5,500,000 and the cost to grade the lot and landscape was $600,000. It is expected the life of the building is 25-40 years with a salvage value of $2,000,000 to $3,000,000.
Discussion Questions:
-If management desired the smallest depreciation possible over the next five (5) years, what recommendation would you make? Support your recommendation by calculations. Why might the company want to do this?
-If management desired the largest depreciation possible over the next five (5) years, what recommendation would you make? Support your recommendation by calculations. Why might the company want to do this?
-Imagine that this company came to you before undertaking this project and presented a proposal outlining the information provided above. What problems or concerns would you have raised for the company to consider?
