Problem 1 - CityBank recently held an auction to dispose of various assets it had obtained through foreclosures and other loan settlements. Representatives of Advantage Metals attended the auction to bid on an abandoned manufacturing plant that CityBank included in the sale. The auction brochure listed the manufacturing plant as including all land, buildings, and equipment. The brochure indicated that an independent appraisal had been conducted and that land was separately valued at $1,000,000, the building at $2,000,000, and the equipment at $4,000,000. This information is believed to be reasonably accurate and fair.
Advantage Metals wanted the site for a recycling business it planned to start at the location. All of the equipment would be used in this new operation. The minimum bid price was set at $4,900,000. As it turned out, the auction was poorly attended. Advantage was the only bidder on this property, and was fortunate to acquire the property at the opening bid minimum.
Determine the correct cost allocation to the land, buildings, and equipment, and prepare a journal entry to reflect this acquisition.
Problem 2 - "Pierce Corporation recently hired a new manager for its struggling construction division. The manager was given responsibility for streamlining operations and restoring profitability. Selling selected assets is one option under consideration.
Begin by reviewing the following asset listing, and prepare hypothetical entries ""as if"" each asset were sold for cash at its estimated fair value. Then, determine which asset should be sold if the objective becomes to (a) have the largest immediate accounting gain, (b) have the largest immediate accounting loss, (c) result in the highest avoidance of future depreciation expense in periods subsequent to the period of asset sale, (d) produce the most immediate cash inflow, (e) have the largest total asset position, or (f) have no change in total assets."
Attachment:- Assignment File.rar