Morris Ashley Case 9-1.docx - Case 9-1 1 Case 9-1 Donated Assets The City of Martinsville donated land to Essex Company The fair value of the land was

Morris Ashley Case 9-1.docx - Case 9-1 1 Case 9-1 Donated...

This preview shows page 1 - 2 out of 4 pages.

Case 9-1 1 Case 9-1 Donated Assets The City of Martinsville donated land to Essex Company. The fair value of the land was $100,000. The land had cost the city $45,000. a) Describe the current accounting treatment for the land. Include in your answer the amount at which the land would be valued by Essex Company and any other income statement or balance sheet effect. Previous practice would have Essex Company realize the donation as a donated asset that would lead to an increase in total assets and equity. Current accounting treatment of recognizing donations has the receiver recording the donation as revenue. The land is valued at $100,000 because it is the fair value of that land. The transaction affects the balance sheet by decreasing fixed assets, or land, for the City of Martinsville. The income statement would show an increase in revenue of $100,000 for Essex Company as SFAS No. 116 considers donated assets to be recognized at the fair value (Schroeder, Clark, & Cathey, 2020).
Image of page 1
Image of page 2

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture