Tastee Bakery donated its used delivery truck to the local Health Right Clinic,which provides free healthcare for people with no medical insurance.The bakery will record the donation as an operating expense.Since Tastee Bakery uses double-declining-balance depreciation,the book value of the truck is only $1,500,but the "blue book" market value of the truck is $2,500.If Tastee Bakery records a charity expense of $1,500,this accounting choice would be considered ________.

Question

Quizplus · Accepted Answer

Recording a charity expense that only reflects the book value of the truck rather than the market value is considered an aggressive accounting choice, as it may overstate the impact of the donation on the company's financial statements. A conservative approach would involve recording the donation at the lower of book value or market value, and a basic or fundamental approach would involve recording the donation at market value.

Tastee Bakery Donated Its Used Delivery Truck to the Local