Acc 541 Week 2 Client Response I

In: Business and Management

Submitted By jsmyers06
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As a newly hired Staff I, you are responsible for analyzing the work papers for one of the clients of your organization. Your client is not clear about why you are asking for information on the following topics: * Adjusting lower cost of market inventory on valuation * Capitalizing interest on building construction * Recording gain or loss on asset disposal * Adjusting goodwill for impairment

Recording Gain or Loss on disposal of Assets
Any asset, such as land, a factory or equipment purchased by Evenbetternow, LLC for business purposes is called a capital asset. When a company disposes of capital assets, it is required by the Financial Accounting Standards Board (FASB) that the financial records account for any gain or loss incurred during the disposal. As capital asset items are used, they will lose value and depreciate. Evenbetternow, LLC recently disposed of two assets. In order to be in compliance with the Financial Accounting Standards Board Statement No. 121 (Accounting for the Impairment or Disposal of Long-Lived Assets) we need assess the disposal of these two items and account for the gain and or loss received. We will first need to determine the original value of the asset and minus the accumulated depreciation to date to discover the book value for each item. By comparing the book value to the amount received for each item, we can determine if Evenbetternow, LLC incurred a gain or loss on each asset (Luecke, 2002). Recording a gain or loss on the disposal of your capital assets is vital as there are related tax implications. For example, any gains (profit) will be taxable as an investment income. If the company experienced a loss, you will be allowed to use this as a deduction from income along with any expenses that resulted from the loss.

Another sort of loss companies must account for is related to goodwill impairment. A…...

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