Question

ESSAY.

The following is a schedule of property dispositions for Sharia Corp.:

		Cost		Accumulated Depreciation		Cash Proceeds		Fair Market Value		Nature of Disposition
Land		$40,000		—		$31,000		$31,000		Expropriation
Building		15,000		—		3,600		—		Demolition
Warehouse		70,000		$16,000		74,000		74,000		Destruction by fire
Machine		8,000		2,800		900		7,200		Trade-in
Furniture		10,000		7,850		—		3,100		Contribution
Automobile		9,000		3,460		2,960		2,960		Sale

The following additional information is available:

Land
On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel of unimproved land to be held as an investment was purchased at a cost of $35,000.

Building
On April 2, land and a building were purchased at a total cost of $75,000, of which 20% was allocated to the building on the corporate books. The real estate was acquired with the intention of demolishing the building, which was done in November. Cash proceeds that were received in November were the net proceeds from the building demolition.

Warehouse
On June 30, the warehouse was destroyed by fi re. The warehouse had been purchased on January 2, 2014, and accumulated depreciation of $16,000 had been properly recorded. On December 27, the insurance proceeds and other funds were used to purchase a replacement warehouse at a cost of $90,000.

Machine
On December 26, the machine was exchanged for another machine having a fair market value of $6,300. Cash of $900 was also received as part of the deal.

Furniture
On August 15, furniture was contributed to a registered charitable organization. No other contributions were made or pledged during the year.

Automobile
On November 3, the automobile was sold to Jared Dutoit, a shareholder.

As a current creditor of Sharia Corp., if you noted that there are several dispositions of property, plant and equipment, would you have any concerns or questions for management?

Answer 1

Please do rate this.Thanks

	Land:Expropriation loss will be reported as extraordiary item
1	Extraordinary Item
	Expropriation Loss		$9,000
2	Building
	Purchase cost of $15000 less delmoition proceeds $3600 ie $11400 alloacted to land
3	Warehouse
	WDV of warehouse is $54000 and insurance proceeds of $74000 lead to gain of
	$20,000
	Extraordiary item
	Gain from damage by fire			$20,000
	Machine:
	FMV of Old machine		$7,200
	WDV of old machine		$5,200
	Total Gain		$2,000
4	FMV ofnew machine		$6,300
	Total gain deferred		$1,750
	Cost of new machine		$4,550
	Other revenues and losses
	Gains from sale of machine		$250
5	Furniture
	Other Expenses and Losses
	Gain from sale of machine		$3,100
	Other Expenses and Losses
	Gain from contribution		$950
6	Automobile
	Other Expenses and Losses
	Loss on sale of automobile		$2,580