Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,270,000 that is currently appraised at $1,470,000. The equipment originally cost $750,000 and is currently valued at $497,000. The inventory is valued on the balance sheet at $440,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes a total of $1,470,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,270,000 that is currently appraised at $1,470,000. The equipment originally cost $750,000 and is currently valued at $497,000. The inventory is valued on the balance sheet at $440,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes a total of $1,470,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter7: Losses—deductions And Limitations

Section: Chapter Questions

Problem 45P: The Goodson Company is a chain of retail electronics stores. How much of a loss can Goodson deduct...

See similar textbooks

Similar questions

New Morning Bakery is in the process of closing its operations. It sold its two-year- old bakery ovens to Great Harvest Bakery for $610,000. The ovens originally cost $ 811,000, had an estimated service life of 10 years, had an estimated residual value of $51,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. 4. Determine the financial statement effects of the sale of the ovens at the end of the second year.
Larson Stores owns a small retail outlet in a California coastal town. In the last few years, a significant percentage of the residents have moved further inland after a number of landslides destroyed area homes. The building was purchased on January 1, 1990, at a cost $1,200,000. The building has been depreciated assuming a service life of 40 years, $300,000 salvage value. The company’s chief financial officer is concerned about impairment. A conservative estimate of future annual net cash flows is $60,000. Larson Stores uses 6% as a discount rate. An independent appraiser estimates the fair value of the property at $450,000. What is the recoverable cost of the property as of December 31, 2019? What should Larson Stores report as the impairment loss, if any in the 2020 financial statements? Select one: a. $441,605; $0 b. $441,605; $75,000 c. $600,000; $75,000 d. $60,000; $0 e. $60,000; $75,000 f. $600,000; $0
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged by an employee. It cost $400 to repair this damage. Blake furniture will depreciate this equipment by the straight-line method (half-year convention) and 150% declining balance method over an estimated useful life of 4 years assuming a $3,000 scrap value.  Prepare depreciation schedules
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged by an employee. It cost $400 to repair this damage. Blake furniture will depreciate this equipment by the straight-line method (half-year convention) and 150% declining balance method over an estimated useful life of 4 years assuming a $3,000 scrap value.  Prepare depreciation schedules. Give reasons for switching to straight line method in both the accelerated methods. Management wants to report the highest possible earnings in its financial statements, yet it also wants to minimize its taxable income reported to the tax authorities. Explain how both of these objectives can be met.  Depreciation is often considered as…
Al Aznar Company is manufacturer of furniture. At the end of 2018, they have inventory worth $ 14500 and out of that $ 4500 worth inventory is damaged. The company decided to repair the inventory and sell it for 3500. The repair cost is $ 500.1. When do a company write down its inventory value (cost) to the Net Realizable Value?2. Imagine that the company decided to sell the damaged inventory for $ 3200 without spending any amount for repairing, how much amount need to write off from the value of inventory at the end of the period?
Mr. Pans owns and operates several retail auto parts and accessories outlets. Management is now considering the possibility of terminating the operation of the Accessories Store and leasing the facilities to another retailer. The monthly results of the Accessories Store operations are as follows: Sales P940,000 Operating expenses directly identifiable with the outlet: Cost of goods sold, etc P890,000 Depreciation 80,000 If operation of Accessories Store is terminated, Mr. Pans can rent-out the facilities for P60,000 a month to a non-competing business. Determine whether the company should continue operations or terminate the Accessories Store and rent-out the facilities. How much is the…
Mr. Pans owns and operates several retail auto parts and accessories outlets. Management is now considering the possibility of terminating the operation of the Accessories Store and leasing the facilities to another retailer. The monthly results of the Accessories Store operations are as follows: Sales P940,000 Operating expenses directly identifiable with the outlet: Cost of goods sold, etc P890,000 Depreciation 80,000 If operation of Accessories Store is terminated, Mr.Pans can rent-out the facilities for P60,000 a month to a non-competing business. Determine whether the company should continue operations or terminate the Accessories Store and rent-out the facilities. How much is the advantage of better option? 1. Continue the Accessories Store - advantage of P 50,000 2. Terminate operation of Accessories Store - advantage of P50,000 3. Continue the Accessories Store - advantage of P10,000 4. Terminate operation of Accessories Store - advantage of P10,000
New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $283,600. The ovens originally cost $378,000, had an estimated service life of 10 years, had an estimated residual value of $23,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Deli. 3. What is the gain or loss on the sale of the ovens at the end of the third year? Gain/Loss On sale
A few years ago, Largo Industries implemented an inventory auditing system at an installed cost of $176,000. Since then, it has taken depreciation deductions totaling $124,960. What is the system's current book value? If Largo sold the system for $111,000, how much recaptured depreciation would result?
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $700,000. The ovens originally cost $910,000, had an estimated service life of 10 years, had an estimated residual value of $60,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. Required: 1. Calculate the balance in the Accumulated Depreciation account at the end of the second year. 2. Calculate the book value of the ovens at the end of the second year.3. What is the gain or loss on the sale of the ovens at the end of the second year? 4. Record the sale of the ovens at the end of the second year.
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000. Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged It cost $400 to repair this damage. Blake furniture will depreciate this equipment by straight-line method with half-year convention over an estimated useful life of 3 years assuming a $3,000 scrap value. a. The only accurate way to account for the success or failure of an entity is to accumulate alltransactions from the opening of business until the business eventually liquidates. Comment andexplain whether this is true or not. Moreover, how do you think the concept of consistency aidin the analysis of financial statements? What type of accounting disclosure is required if thisconcept is not applied?
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000. Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged It cost $400 to repair this damage. Blake furniture will depreciate this equipment by straight-line method with half-year convention over an estimated useful life of 3 years assuming a $3,000 scrap value. a. Do you agree that depreciation is often considered as major source of funds? Why? b. Which tangible assets are depreciated and which are not, why? c. A rental agency collects rent in advance. Why the rent is collected treated as a liability/asset? Inwhich category this liability/asset will be classified into and how would you record it? Where should it appear in the financial statements? d. The only accurate way to…