Olabisi operates a lawn care service in southeastern Missouri. Olabisi incurs $63,000 of expenses determining the feasibility of expanding the business to southwestern Missouri. If Olabisi expands the business, the $63,000 is deductible in
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11. Olabisi operates a lawn care service in southeastern Missouri. Olabisi incurs $63,000 of expenses determining the feasibility of expanding the business to southwestern Missouri. If Olabisi expands the business, the $63,000 is deductible in the current year. If Olabisi does not do so, then the $63,000 must be amortized over a 180-month period.
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- Delta Electric Company expects to have an annual taxable income of $500,000 from its residential accounts over the next two years. The company is also bidding on a two-year wiring service job for a large apartment complex. This commercial service requires the purchase of a new truck equipped with wire-pulling tools at a cost of $50,000. The equipment falls into the MACRS five-year class and will be retained for future use (instead of being sold) after two years, indicating no gain or loss on this property. The project will bring in additional annual revenue of $200,000, but it is expected to incur additional annual operating costs of $100,000. Compute the marginal tax rates applicable to the project's operating profits for the next two years.Delta Electric Company expects to have an annual taxable income of $500,000 from its residential accounts over the next two years. The company is also bidding on a two-year wiring service job for a large apartment complex. This commercial service requires the purchase of a new truck equipped with wirepulling tools at a cost of $50,000. The equipment falls into the MACRS five-year class and will be retained for future use (instead of being sold) after two years, indicating no gain or loss on this property. The project will bring in additional annual revenue of $200,000, but it is expected to incur additional annual operating costs of $100,000. Compute the marginal tax rates applicable to the project'soperating profits for the next two years.A company purchased a new forging machine to manufacture disks for airplane turbine engines. The new press costs $3,800,000, and it falls into the seven-year MACRS property class. The company has to pay property taxes to the local township for ownership of this forging machine at a rate of 1.2% on the beginning book value of each year.(a) Determine the book value of the asset at the beginning of each tax year.(b) Determine the amount of property taxes over the machine's depreciable life.
- Company X incurred the following transactions in the current year. For each transaction, explain whether each transaction is tax deductible under the ITAA. Depreciation on the buildings The company incurred legal expenses opposing an application by its competitor to extend its patent on a brand of mower. If the patent was not extended, then Company X could produce a similar mower. The company borrowed money to cover the purchase of a new plant. The loan is repayable in 10 years. Because of a shortage of working capital, the company was forced to sell off some land. The land had originally been bought in October 1995 The company also purchased a new car for the managing directorKeating Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $25,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,750. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a a. $27,000 loss b. $17,000 loss c. $14,500 profit d. $7,000 profit4. Sheridan purchased the license for distribution of a popular consumer product on January 1, 2020, for $146,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Sheridan can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2020? The amount to be amortized _______
- Keating Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $25,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,750. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a Oa. $17,000 loss Ob. $7,000 profit Oc: $14,500 profit Od. $27,000 loss1) McCoy's Fish House purchases a tract of land and an existing building for $1,000,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $3,000. The company also pays $14,000 in property taxes, which includes $9,000 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $5,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $50,000 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $5,000 and pays an additional $11,000 to level the land. 1)Determine the amount McCoy’s Fish House should record as the cost of the land. (Amounts to be deducted should be indicated by a minus sign.) University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000…Pet Supply purchased fixed assets two years ago at a cost of $43,800. It no longer needs the assets, so it is going to sell them today for $32,500. The assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. What is the net cash flow from the sale if the tax rate is 35%?
- Jos is a Sales Manager. He uses his own car to travel to various locations. He acquired the car on 1 October 2021 for $60,000. The acquisition cost was funded entirely by a loan at an interest rate of 15%. He has determined that the depreciation deduction on the car would be $2,300 for the year. In addition, Jos incurred the following expenses during the year: Registration and insurance = $2,000; Repairs and maintenance = $1,000; and Oil and fuel costs = $1,500. For the period 1 October 2021 to 30 June 2022, Jos estimates that the car travelled 15,000 kilometres, 12,000 of which were for business purposes. You may assume that Jos has maintained all necessary records and a logbook. Required: Calculate Jos's deduction for car expenses under the two methods (cent per kilometre rate 0.72 and logbook) in Div 28 of Income Tax Assessment Act 1997. Assume that depreciation has been adjusted for part-year use and the impact of the car limitKeating Co. is considering disposing of equipment that cost $56,000 and has $39,200 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $29,000 less a 9% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $46,000. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a Oa. $11,610 loss Ob. $13,932 profit Oc. $8,127 loss Od. 117415 profitKeating Co. is considering disposing of equipment that cost $68,000 and has $47,600 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $25,000 less a 9% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,000. Keating will incur repair, insurance, and property tax expenses estimated at $11,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a a.$14,250 loss b.$9,975 loss c.$21,375 profit d.$17,100 profit