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Question: Tones Company purchased a warehouse in a

Tones Company purchased a warehouse in a downtown district where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Noting that depreciation can be taken only on the building, Carter favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she says, net income is negatively impacted by additional depreciation and will cause the company’s stock price to go down.


Answer the following questions.

(a) What stakeholder interests are in conflict?

(b) What ethical issues does Carter face?

(c) How should these costs be allocated?

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> Plant acquisitions for selected companies are as follows.1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $700,000. At the time of purchase, Torres’s assets had the foll

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> Use the information presented for Ottawa Corporation in BE10-14, but assume the machinery is sold for $5,200 instead of $10,500. In BE10-14 Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2011. Depreciation has been recorded

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> Indicate where the following items would be shown on a balance sheet. (a) A lien that was attached to the land when purchased. (b) Landscaping costs. (c) Attorney’s fees and recording fees related to purchasing land. (d) Variable overhe


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