On January 1, Scion Co

question 111

Multiple Choice

On January 1, Scion Co. purchased land with a usable building on it for $210,000. At the time of purchase, the fair market values of the land and building were $80,000 and $160,000, respectively. Scion assigned the entire purchase cost of $240,000 to land. Scion should depreciate the building using the straight-line method over 20 years with an expected zero residual value. As a result of Scion's treatment of the purchase of land and building, its current net income is:

• A) understated by $10,500.
• B) understated by $7,000.
• C) overstated by $7,000.
• D) overstated by $10,500.

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Definitions:

Criminal Trials

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