Markus Company received two donations during the year. A long- term client donated a piece of artwork from their personal art collection to display in their entrance way as a thank- you for all of the years the company had completed work for him immediately. The artwork was appraised at $ 80,000. Markus also received during the year a vacant building as a donation. The building has a 20- year estimated remaining useful life ($ 50,000 residual value), which was recognized in the donation agreement at the time the company was guaranteed occupancy. Transfer costs of $ 35,000 were paid by the company. The building originally cost $ 1,200,000, 10 years earlier.
The building was recently appraised at $ 650,000 market value by the city’s tax assessor. Anticipating occupancy within the next 10 days, the company spent $ 250,000 for repairs and internal rearrangements, expected to have value for 8 years. There are no unresolved contingencies about the building and Markus Company’s permanent occupancy.

1. Give all entries for Markus Company related to
(a) The donations,
(b) The renovation, and
(c) Any amortization at the end of the first year of occupancy, assuming that Markus uses straight- line amortization.
2. What would appear on the SCF in relation to the transactions recorded in requirement (1)?
3. What objections are raised concerning the accounting policy of capitalizing and depreciating a donated asset? Explain.

  • CreatedFebruary 17, 2015
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