The city of Morgantown gave a piece of land to Acme,Inc.so that the company would build its new factory in Morgantown and create many local jobs.One appraiser said the land was worth $500,000,while a second appraiser said the land was worth $520,000.
1.What effect will it have on Acme's earnings per share if it records the land at $500,000 rather than $520,000?
2.What effect will it have on Acme's total assets if it records the land at $500,000 rather than $520,000?
3.Name one ratio that will be affected by Acme's choice of value for the land.Will this ratio be higher or lower if Acme records the land at $500,000 rather than $520,000?
4.Explain the relationship between management's choice of recorded value for the land and the company's quality of earnings.

Question

The city of Morgantown gave a piece of land to Acme,Inc.so that the company would build its new factory in Morgantown and create many local jobs.One appraiser said the land was worth $500,000,while a second appraiser said the land was worth $520,000.
1.What effect will it have on Acme's earnings per share if it records the land at $500,000 rather than $520,000?
  2.What effect will it have on Acme's total assets if it records the land at $500,000 rather than $520,000?
  3.Name one ratio that will be affected by Acme's choice of value for the land.Will this ratio be higher or lower if Acme records the land at $500,000 rather than $520,000?
4.Explain the relationship between management's choice of recorded value for the land and the company's quality of earnings.

Quizplus · Accepted Answer

The Answer of The city of Morgantown gave a piece of land to Acme,Inc.so that the company would build its new factory in Morgantown and create many local jobs.One appraiser said the land was worth $500,000,while a second appraiser said the land was worth $520,000.
1.What effect will it have on Acme's earnings per share if it records the land at $500,000 rather than $520,000?
  2.What effect will it have on Acme's total assets if it records the land at $500,000 rather than $520,000?
  3.Name one ratio that will be affected by Acme's choice of value for the land.Will this ratio be higher or lower if Acme records the land at $500,000 rather than $520,000?
4.Explain the relationship between management's choice of recorded value for the land and the company's quality of earnings.

The City of Morgantown Gave a Piece of Land to Acme,Inc.so