1. adjustment for accrued fees was omitted at march 31, the end of the current y
ID: 2442784 • Letter: 1
Question
1. adjustment for accrued fees was omitted at march 31, the end of the current year. indicate which items will be in error, because of the omiision on (a) the income statement for the current year and (b) the balance sheet as of march 31. also indicate whether the items in error will be overstated or undertated.
2. for a recent year, barnes & noble inc. reported property, plant, and equipment of $2,400,685,000 and accumulated depreciation of $ 1,576,052,000.
a. what was the book value of the fixed assets?
b. would the book values of barnes&noble's fixed assets normally approximate their fair market values?
Explanation / Answer
1.
(a) the income statement for the current year : Fees Rvenue - understated consequently Income for the current year would also be understated.
(b) the balance sheet as of march 31. : Fees Receivable would be understated on contra Owners' Equity would also be understated.
2. for a recent year, barnes & noble inc. reported property, plant, and equipment of $2,400,685,000 and accumulated depreciation of $ 1,576,052,000.
a. what was the book value of the fixed assets?
Property, plant and equipment (at cost) $2,400,685,000
Less: Accumulated Depreciation $1,576,052,000
Book Value $824,633,000
b. would the book values of barnes&noble's fixed assets normally approximate their fair market values?
No, book value of the fixed assets may not normally approximate their fair market values.
The easiest way to describe the two values is to understand that book value represents the depreciated value of what was paid for a particular asset, while fair market value represents the current price at which that asset can be purchased in the marketplace.
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