How the ski chalet be reflected on financial statements

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Question - Identify the effects of the following events on the first year's income statement and balance sheet:

a. A company paid a $2,000 bill for a fire insurance policy that covers the current year and the next year.

b. A company purchased a trash compactor for $200 that has an expected life of five years. What are the balance sheet effects of treating the $200 as an expense this year versus the effects of depreciating the trash compactor over five years? What are the effects on net income?

c. Two attorneys, working together under a corporate structure, decide that a ski chalet at Vail is necessary to entertain current and prospective clients. At the same time, they are considering the addition of a third attorney as another owner of their company. This third attorney has a ski chalet that she purchased five years ago for $120,000. Its current market value is $200,000. How should the ski chalet be reflected on the corporation's financial statements, assuming that the new attorney is hired and the ski chalet is transferred to the corporation?

Reference no: EM133050642

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