Chapter 6, Problem 6.3BE

In 1994, Coronado Limited completed the construction of a building at a cost of $1.59 million; it occupied the building in January1995. It was estimated that the building would have a useful life of 40 years and a residual value of $390,000.Early in 2005, an addition to the building was constructed at a cost of $580,000. At that time, no changes were expected in its usefullife, but the residual value with the addition was estimated to increase by $130,000. The addition would not be of economic use tothe company beyond the life of the original building.In 2023, as a result of a thorough review of its depreciation policies, company management determined that the building's originaluseful life should have been estimated at 30 years. The neighbourhood where the building is has been going through a renewal, witholder buildings being torn down and new ones being built. Because of this, it is now expected that the company's building andaddition are unlikely to have any residual value at the…

The unadjusted trial balance as of December 31, 2024, for the Bags Consulting Company appears below. December 31 is the company's reporting year-end. Account Title Cash Accounts receivable Prepaid insurance Land Buildings Accumulated depreciation-buildings Office equipment Accumulated depreciation-office equipment Accounts payable Salaries payable Deferred rent revenue Common stock Retained earnings Debits $ 20,800 Credits 10,000 4,000 255,000 80,000 $ 32,000 117,000 46,800 31,650 Ө 13,500 300,000 50,550 Service revenue Interest revenue Rent revenue Salaries expense Depreciation expense Insurance expense Utilities expense Maintenance expense Totals 94,000 5,800 Ө 41,000 Ө Ө 25,200 21,300 $ 574,300 $ 574,300 Information necessary to prepare the year-end adjusting entries appears below. a. The buildings have an estimated useful life of 50 years with no salvage value. The company uses the straight-line depreciation method. b. The office equipment is depreciated at 10 percent of original…

On December 1, 20X1 a company bought a call option costing $100,000 as a speculative investment. The call option gave the company the right to purchase 100,000 barrels of oil for $110 per barrel during April 20X2. As of December 31, 20X1 the call option had a value of $125,000. The company liquidated the call option on April 15, 20X2 in exchange for $175,000. Which of the following accurately describes GAAP accounting for this call option? bok Multiple Choice The realized gain applicable to the year ending December 31, 20X1 is $25,000. The realized gain recognized on April 15, 20X2 is $75,000. The unrealized gain recognized on April 15, 20X2 is $50,000. The call option will be reported on the December 31, 20X1 balance sheet at $125,000 and a $25,000 unrealized gain will be reported as a component of income from continuing operations for the year ending December 31, 20X1.