Illustrate the differences between prevention and appraisal costs using a restaurant setting as an example
What will be an ideal response?
Prevention costs are associated with preventing defects before they happen. In a restaurant, this would be the expense associated with training employees how to take an order, prepare food, bus tables or in mistake-proofing systems. Appraisal costs are incurred in assessing the level of performance of the firm's processes. In a restaurant this might be inspections by managers, reviewing and acting on customer satisfaction cards, or testing prepared dishes.
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Indicate whether the statement is true or false
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Perry Inc. and Dally Company entered into an exchange of real property. Here is the information for the properties to be exchanged. PerryDallyFMV$500,000 $530,000 Adjusted tax basis 410,000 283,000 Mortgage 70,000 100,000 Pursuant to the exchange, Perry assumed the mortgage on the Dally property, and Dally assumed the mortgage on the Perry property. Compute Dally's gain recognized on the exchange and its tax basis in the property received from Perry.
A. 100,000 gain recognized; $383,000 basis in the Perry property. B. $30,000 gain recognized; $313,000 basis in the Perry property. C. $30,000 gain recognized; $283,000 basis in the Perry property. D. None of the choices are correct.