For each of the following cases, respond to the question asked and indicate the accounting principle or

Question:

For each of the following cases, respond to the question asked and indicate the accounting principle or concept that applies.

1. Gomez Company has decided to charge off as a loss the portion of its accounts receivable that it estimates will be uncollectible. The accounts involved resulted from the current year’s sales. Is this correct or incorrect accounting? Why?

2. On March 15 of last year, Butler Inc. purchased land for $210,000, on which it planned to construct an office building. At the end of the year, the land had increased in value to $260,000. Nevertheless, Butler recognized no income as a result of the increase in value. Is this correct or incorrect accounting? Why?

3. Three years ago, Nicholson Company purchased a machine for $300,000. The machine is expected to have no salvage value. Nevertheless, Nicholson continues to keep the asset’s cost in its accounting records and to depreciate the asset over its nine-year useful life. Is this correct or incorrect accounting? Why?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...