Directions:
Indicate what account is impacted and the amount of the impact. Also, tell where the account will be presented on the financial statement. Assume a 35% tax rate if needed.
1. An automobile dealer sells for $138,000 an extremely rare Invicta, which it purchased for $21,600 10 years ago and held as an investment. This is the only vintage automobile the dealership owns.
2. A drilling company during the current year, extended the estimated useful life of drilling equipment from 9 to 14 years. As a result, the current year depreciation was $22,840 lower than in past years.
3. A construction company, at a cost of $39,650, prepared a major proposal for a government loan. The loan is not approved.
4. A food distributor that sells wholesale to supermarket chains and to fast food restaurants decides to discontinue selling to the supermarket chains. The supermarket chains had gross operating loss of $341,456 and a book value of $197,050. There was no buyer available, so the distributor simply shut down the operations.