s Real Angus Steakhouse purchased land for $75,000 cash. They also incurred comm

Question

s Real Angus Steakhouse purchased land for $75,000 cash. They also incurred commissions of $4,500 property taxes of $5,000, and title insurance of $800. The $5,000 in property taxes includes $4,000 in back nmounalgus on behalf of the seller and $1,000 due for the current year after the purchase date. For A. $84,300. B. $85,300. C. $75,000, D. $83,500, 26. Costello Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. Costello should record: A. neither a gain nor a loss the gain that occurred in this case would not be recognized. B. a loss of $1,000. C. neither a gain nor a loss the computer was sold at its book value. D. a gain of $1,000.

Explanation / Answer

25)correct option is "A" -84,300

**Property taxes for current period will be charges as expense and not to be capitalized

26)Depreciation =cost /useful life

             = 10000/5 = 2000 per year

Accumulated depreciation for 2 years : 2000*2=4000

Carrying value =cost-accumulated depreciation

        = 10000-4000 =$6000

Gain/(loss)=sale value -carrying value

            = 5000-6000

              = $ -1000 loss

correct option is "B"

Purchase cost 75000 commission 4500 property taxes 4000 Title insurance 800 Total cost 84300

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