Cape Horn Company purchased a building on March 1, 1988, at acost of $ 4,186,000

Question

Cape Horn Company purchased a building on March 1, 1988, at acost of $ 4,186,000. For financial reporting purposes, the buildingwas being depreciated over 372 months at $ 10,500 per month. Theremaining $ 280,000 of the cost was the estimated salvage value.The build-ing was sold on October 31, 2007, for $ 7.2 million. Anaccelerated depreciation method allowed by the tax code was used torecord depreciation for the tax return. As of October 31, 2007, thecompany had recorded $ 3.5 million of depreciation for tax purposesusing an accelerated basis. Determine ( a) the amount of gain orloss that should be reported on the income statement regarding thesale of the building, ( b) the amount of gain or loss that shouldbe reported on the tax return regarding the sale of the building,and ( c) why a company would use straight- line depreciation forfinancial reporting purposes and accelerated depreciation for taxpurposes.

Explanation / Answer

0m

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.