Cases that Relate to the Valuation of Assets

The following cases relate to the valuation of assets. Consider each case independently.

500. World-wide Travel Agency has office supplies costing $1,400 on hand at the balance sheet date. These supplies were purchased from a supplier that does not give cash refunds. World-wide’s management believes that the company could sell these supplies for no more than $500 if it were to advertise them for sale. However, the company expects to use these suppliers and to purchase more when they are gone. In its balance sheet, the supplies were present at $500.
501. Perez Corporation purchased land in 1957 for $40,000. In the current year, it purchased a similar parcel of land for $300,000. In its current year balance sheet, the company presented these two parcels of land at a combined amount of $340,000.
502. At December 30, year 1, Felix, Inc, purchased a computer system from a mail-order supplier for $14,000. The retail value of the system, according to the mail-order supplier, was $20,000. On January 7, however, the system was stolen during a burglary. In its December 31, year 1, balance sheet. Felix showed this computer system at $14,000 and made no reference to its retail valued or to the burglary. The December balance sheet was issued in February year 2.

In each case, indicate the appropriate balance sheet amount of the asset under GAAP. If the amount assigned by the company is incorrect; briefly explain the accounting principles that have been violated. If the amount is correct, identify the accounting principles that justify this amount.

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