Overview
Respond to the following posts. Each response needs at least 2 academic references and 200 words.
Dialogue Discussion Forum for Period 3: Dialogue Post Week 5 by Alexus
When a company acquires land for the purpose of constructing a new facility, the costs directly attributable to preparing the land for its intended use should be capitalized. According to U.S. GAAP, this includes the purchase price of the land, legal fees, appraisal costs, and the demolition costs of the old building because these expenditures are necessary to prepare the land for construction (Kieso, Weygandt, & Warfield, 2022). The demolition does not create a new asset itself but is a land preparation cost; therefore, it becomes part of the land’s capitalized cost rather than an immediate expense. In contrast, if the old building had been intended for use, the building would be capitalized as an asset and depreciated.
This decision reflects the accountant’s role in laying a financial “foundation” for the company. Just as Matthew 7:24 speaks of building on rock, accountants must ensure that costs are properly classified to create reliable financial statements. A firm accounting foundation supports wise business decisions, credibility with stakeholders, and long-term sustainability. As Mintz and Morris (2020) note, ethical obligations in accounting include applying standards consistently, while Cafferky (2015) emphasizes faithfulness in seemingly small judgments. Proper capitalization exemplifies diligence and stewardship.
References:
Cafferky, M. E. (2015). Business ethics in biblical perspective: A comprehensive introduction. InterVarsity Press.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2022). Intermediate accounting (18th ed.). Wiley.
Mintz, S. M., & Morris, R. (2020). Ethical obligations and decision making in accounting: Text and cases (6th ed.). McGraw-Hill Education.
Zondervan. (2017). NIV, Value Thinline Bible, Leathersoft, Brown, Comfort Print Imitation Leather. Zondervan.
Dialogue Post Week 6 by Brittany Bulfer
Since the information regarding the safety hazard is available before the financial statements have been issued, it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated, a loss should be accrued by a charge to income (FASB, 450-20-25-2). The company would report this by accruing the estimated amount to a liability account and the loss to an expense account. If the loss is not accrued, because it is not probable or the loss cannot be reasonably estimated, then a footnote disclosure should be made when there is at least a reasonable possibility that a loss might have been incurred (Schroeder, Clark, & Cathey, 2023). The disclosure should include the nature of the contingency and an estimate of the potential loss, range of loss, or a statement that such an estimate cannot be made (FASB, 450-20-50-4).
The Hebrew word for prudent is ʿārûm, and it can also mean crafty, shrewd, or sensible (Pierce). It alludes to using the knowledge you have to help facilitate a desired future outcome. In Proverbs 22:3 the prudent take in knowledge of the danger and change their course of action in hopes of a better future outcome. One of our goals as accountants is to use the information that is available to us to make confident judgement calls, in sometimes very grey areas, that will endure scrutiny and provide the most accurate representation of a company’s financial standing.
References
FASB (Financial Accounting Standards Board). (n.d.). ASC 450-20-25-2. Accounting standards codification. Retrieved from asc.fasb.org/450/showallinonepage
FASB (Financial Accounting Standards Board). (n.d.). ASC 450-20-50-4. Accounting standards codification. Retrieved from asc.fasb.org/450/showallinonepage
Pierce, L., (n.d.). Strong's H6175 - ʿārûm . In Outline of Biblical Usage. Retrieved from www.blueletterbible.org/lexicon/h6175/nkjv/wlc/0-1/Links to an external site.
Schroeder, R. G., Clark, M. W., & Cathey, J. M., (2023). Financial Accounting Theory and Analysis: Text and Cases (14thedition). Hoboken, NJ: John Wiley & Sons, Inc.