Bayside Ltd

question 48

Multiple Choice

Bayside Ltd.owns a piece of land it had purchased in 2010 for $400,000.When they started to develop the land in 2011, they discovered that there were environmental problems with the land.It is now estimated to be worth only $150,000.Which of the following is the correct way to account for this?

• A)No accounting is necessary because the land is recorded at its historical cost, not its market value.
• B)The land account should be written down to $150,000 and a loss recognized.
• C)The land should be written off completely because now the company cannot use it for the purpose they intended to.
• D)The land should be amortized at a new rate to reflect the decline in its value.

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Definitions:

PERT Analysis

Program Evaluation and Review Technique (PERT) analysis is a project management tool used to plan, schedule, and control complex activities, focusing on task durations to identify minimum project duration.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a dataset, assigning weights to each number.

Expected Time

The estimated time assumed for the completion of a task or project, often used in planning and scheduling.

Optimistic

A mindset or attitude that tends to expect the most favorable outcomes of situations or believes that good ultimately predominates over evil in the world.