In 2002, Yates Company Purchased Land and a Building at a Cost

question 77

Essay

In 2002, Yates Company purchased land and a building at a cost of $2,000,000, with $600,000 allocated to land and $1,400,000 to the building. On December 31, 2011, the accounting records showed the following:

During 2012, it is determined that the building is on the site of a toxic waste dump and the future cash flows associated with the land and building are less than the recorded total book value for these two assets. The fair value of the land and building is $200,000, of which $60,000 is land. Make any journal entries necessary to record the asset impairment.

---

Definitions:

Traditional Costing

A costing method that allocates overhead based on a predetermined rate, often leading to less accuracy in product costing.

Direct Labor-Hours

The total number of working hours spent by employees directly involved in manufacturing goods, critical for computing production costs.

Unit Product Cost

The total cost associated with producing a single unit of product, including direct materials, direct labor, and manufacturing overhead.

Activity-Based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each, aiming for more accurate cost management.