Burnt Red Company Balance Sheet December 31, 2016 Assets Total current assets $3

Question

Burnt Red Company
Balance Sheet
December 31, 2016 Assets Total current assets $350,000 Replacement Cost Accumulated Depreciation Book Value Property, plant, and equipment:    Land $250,000 $50,000 $200,000    Buildings 450,000 160,000 290,000    Factory equipment 375,000 140,000 235,000    Office equipment 125,000 60,000 65,000    Patents 90,000 — 90,000    Goodwill 60,000 10,000 50,000       Total property, plant, and equipment $1,350,000 $420,000 $930,000 1. Fixed assets should be reported at 2. Land 3. Patents and goodwill should be 4. Goodwill should be Burnt Red Company
Balance Sheet
December 31, 2016 Assets Total current assets $350,000 Replacement Cost Accumulated Depreciation Book Value Property, plant, and equipment:    Land $250,000 $50,000 $200,000    Buildings 450,000 160,000 290,000    Factory equipment 375,000 140,000 235,000    Office equipment 125,000 60,000 65,000    Patents 90,000 — 90,000    Goodwill 60,000 10,000 50,000       Total property, plant, and equipment $1,350,000 $420,000 $930,000

Explanation / Answer

1.) Fixed Asset should be reported at cost and not replacement cost.

2.)Land will not depreciate therefore it should be reported at $250,000

3.)Patents and good will comes under Intangible assets under Fixed assets. Patents are reported at (Cost - Accumulated Depreciation )= net book value ie.,$90,000

4.)Good will also comes under intangible asset. It is not amortized it is only impaired (should be written down the impairment loss) in this case it will be reported at $60,000

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