On November 4, 2021, Blue Company acquired and placed in service an asset (27.5-year residential real property) for $200,000 foruse in its business. In 2021 and 2022, respectively, Blue deducted $642 and $5,128 of cost recovery. These amounts were incorrect;Blue applied the wrong percentages (i.e., those for 39-year rather than 27.5-year assets). Blue should have taken $910 and $7,272cost recovery in 2021 and 2022, respectively. On January 1, 2023, the asset was sold for $180,000.If required, round all computations to the nearest dollar.Click here to access the depreciation tables in the textbook.a. The adjusted basis of the asset at the end of 2022 is $b. The cost recovery deduction for 2023 is $c. Theon the sale of the asset in 2023 is $

The objective of the question is to calculate the adjusted basis of the asset at the end of 2022,…

Answered: On November 4, 2021, Blue Company…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 31P

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At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.
Nona Co. purchased land worth P20,000,000 on January 1, 2021. The company uses the revaluation model in accounting for its PPE. On December 31, 2021, an independent appraiser valued the land at P43,000,000. But on December 31, 2022, the land had a fair value of P8,000,000. How much revaluation deficit/impairment loss should be recognized in the income statement on December 31, 2022?
On January 2, 2018, Orenge Corporation purchased equipment for $300,000 with an ADS recovery period of 10 years and a MACRS useful life of 7 years. Section 179 was not elected. MACRS depreciation properly claimed on the asset, including depreciation in the year of sale, totaled $79,605. The equipment was sold on July 1, 2019, for $290,000. As a result of the sale, the adjustment to taxable income needed to arrive at current E & P is: a. No adjustment is required. b. Decrease $49,605. c. Increase $49,605. d. Decrease $79,605. e. None of the above. Please explain step by step ?
On November 4, 2019, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2019 and 2020, respectively, Blue deducted $642 and $5,128 of cost recovery. These amounts were incorrect; Blue applied the wrong percentages (i.c., those for 39 year rather than 27.5 year assets). Blue should have taken $910 and $7,272 cost recovery in 2019 and 2020, respectively. On January 1, 2021, the asset was sold for $180,000. If required, round all computations to the nearest dollar. Click here to access the depreciation tables in the textbook. a. The adjusted basis of the asset at the end of 2020 is $ b. The cost recovery deduction for 2021 is $ c. The loss on the sale of the asset in 2021 is
Nona Co. purchased land worth P20,000,000 on January 1, 2021. The company uses the revaluation model in accounting for its PPE. On December 31, 2021, an independent appraiser valued the land at P43,000,000. But on December 31, 2022, the land had a fair value of P8,000,000. How much revaluation deficit/impairment loss should be recognized in the income statement on December 31, 2022? (No need to put "+" or "", just place absolute value)
Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability? 2. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?
Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability?
On March 31, 2024, Susquehanna Insurance purchased an office building for $12, 600, 000. Based on their relative fair values, one - third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased separately from office equipment on the same date for $1,380, 000 and $880, 000, respectively. The company uses the straight - line method to depreciate its buildings and the double - declining - balance method to depreciate all other depreciable assets. The estimated useful lives and residual values of these assets are as follows: Service Life Residual Value Building 40 10% of cost Furniture and fixtures 20 10% of cost Office equipment 10 $ 48, 000 Required: Calculate depreciation for the years ended December 31, 2024 and 2025. What book values would be reported in the December 31, 2025, balance sheet (including land)?
Jasmin Company purchased an investment property on January 1, 2017 at a cost of P2,200,000. The property has a useful life of 40 years and at December 31, 2019 had a fair value of P3,000,000. On January 1, 2020, the property was sold for net proceeds of P2,900,000. The fair value of the investment property cannot be measured reliably. What is the gain or loss to be recognized in profit or loss for the year ended December 31, 2020 regarding the disposal of the property?
On January 1, 2019, Uptown Builders purchased a machine for $200,000. Uptown's policy is to depreciate this type of machinery using straight-line depreciation, over five years, with no residual value. Because of a bookkeeping error, no depreciation was recognized in Uptown's 2019 or 2020 financial statements. The error was discovered during the preparation of the 2021 financial statements. Ignoring income taxes, the impact of this error on retained earnings prior to any 2021 adjustments is: Question 8 options: Overstatement of $80,000 Understatement of $120,000 Understatement of $80,000 Overstatement of $120,000
HMI Building Ltd. (HBL) purchased a piece of vacant land on March 1, 2020, for$345,000, and incurred an additional $24,000 in transaction costs as part of thispurchase. HBL built an apartment building on this land for $1,235,000, which wascompleted on November 30, 2020, and is expected to have a useful life of 50 years.HBL incurred an additional $1,500 in legal costs on November 30, 2020, to register theaddition of the property to the land title. In December 2020, HBL incurred $35,000 incosts to repair accidental employee damage to the apartment building, which occurredwhen construction equipment was being removed from the premises.HBL had the investment property appraised on December 31, 2020, and the value ofthe property was determined to be $1,655,000. HBL follows IFRS for reportingpurposes.Required:a) Assume that HBL uses the cost model to classify the investment property and usesthe straight-line method to record depreciation. Prepare the journal entries requiredfor HBL to record…
On December 31, 2021, Purple Company sold a building, receiving as a consideration a P4,000,000 non-interest bearing note due in three years. The building costs P3,800,000 and the accumulated depreciation was P1,600,000 at the date of sale. The prevailing rate of interest for a note of this type was 12%. How much gain or loss should Purple report on the sale of the asset?

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