ABC  Limited located in a country which has a capital gains tax, conducted the following transactions: a.     Purchased a building in February 2018 for $26,000,000. In March 2019, the company spent $2, 800,000 to install solar panels for electricity in the building. The building was sold for $40,000,000 in 2021. The annual maintenance cost was $500,000. The cost of advertising the sale of the building and the legal fees amounted to $1,200,000. b.     A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle was sold in 2021 for $4.5 million. c.      Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021 for 1 million. d.     Purchased a government bond for $5,000,000 in 2018 and sold it for $7,500,000 in 2021. The company is entitled to an Annual Exemption of $500,000. Capital losses as of 1 January 2021 was $1,500,000. Calculate the capital gains tax in 2021, assuming a capital gains tax of 20   Question 48Answer a. $1,100,000 b. $600,000 c. $2,000,000 d. $1,400,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ABC  Limited located in a country which has a capital gains tax, conducted the following transactions:

a.     Purchased a building in February 2018 for $26,000,000. In March 2019, the company spent $2, 800,000 to install solar panels for electricity in the building. The building was sold for $40,000,000 in 2021. The annual maintenance cost was $500,000. The cost of advertising the sale of the building and the legal fees amounted to $1,200,000.

b.     A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle was sold in 2021 for $4.5 million.

c.      Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021 for 1 million.

d.     Purchased a government bond for $5,000,000 in 2018 and sold it for $7,500,000 in 2021.

The company is entitled to an Annual Exemption of $500,000. Capital losses as of 1 January 2021 was $1,500,000.

Calculate the capital gains tax in 2021, assuming a capital gains tax of 20

 

Question 48Answer

a.

$1,100,000

b.

$600,000

c.

$2,000,000

d.

$1,400,000 

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