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A: Ans. Intangible assets are the assets which cannot be touched or felt.
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- Shawn John and his wife operate a successful snack packaging business, Healthy Snacks, in St Mary, Jamaica. The bulk buying of the raw materials (nuts and dried fruits), the packaging and delivery to corporate area shops are done by the members of the family. The accounts for Mr. John’s business at 31st December 2015 showed a profit of $4,500,000 after charging: • $180,000 depreciation of equipment and office furniture; • $750,000 for salary to his wife who supervises the office, $496,000 to his 18 year old son Shane, and $1,720,000 to himself. • $78,000 interest on a loan he had obtained to expand his business 3 years ago. (a) Prepare a statement; with notes where applicable; of the Healthy Snacks business showing the taxable profits and income tax liability for the year of assessment 2015 for Shawn John (b) Shane is a part-time student at the University of the West Indies. What is his tax liability, if any?Renee operates a proprietorship selling collectibles over the Web, and last year she purchased a building for $24 million for her business. This year, Rene’s proprietorship reported revenue of $95.5 million and incurred total expenses of $88.6 million. Her expenses included cost of goods sold of $48.5 million. Sales commissions paid of $16.9 million. $10.5 million of interest paid on the building mortgage, and $12.7 million of depreciation. What’s Renee’s adjusted taxable income for purposes of calculating the limitation on business interest expense? What is the maximum amount of business interest expense that Renee can deduct this year, and how is the disallowed interest expense (if any) treated? Suppose that Renee’s revenue includes $5 million of business interest income. What is the maximum amount of business interest expense that could be deducted this year under the business interest limitation?Ray, 83, is a used car dealer. He lives in a rural community and operates the business out of his home. One room in his 6-room house is used exclusively for his business office. He parks the cars in his front yard, and when customers come along, they sit on the front porch and negotiate a sale price. The income statement for Rays auto business is as follows: If Rays home were rental property, the annual depreciation would be 2,900. The utilities and upkeep on the home cost Ray 6,400 for the year. Rays mortgage interest for the year is 2,400. When asked about the loan fees, Ray bitterly responds that Jim, the bank loan officer, charges him 10 percent of his gross profit on cars financed through the bank. Ray says, The money is under the table, and if I dont shell out the cash, Jim wont loan the money to my customers to buy my cars. Everybody goes to Jimhes got the cash. Write a letter to Ray explaining the proper treatment of this information on his tax return.
- During the last five months of the year, Dwana opens a new Internet telecommunications business called Dwan-Com. Dwan-Com bills 50,000 of revenues, but receives only 40,000 cash. Dwan-Com incurs 3,000 of supply expenses, and 41,000 of labor costs. Dwan-Com pays for 2,200 of the supplies and 38,000 of the labor costs in the current year. a. What is Dwan-Coms taxable income if it elects the cash method of accounting? b. What is Dwan-Coms taxable income if it elects the accrual method of accounting? c. What method of accounting do you recommend that Dwan-Com elect?Mr. Pans owns and operates several retail auto parts and accessories outlets. Management is now considering the possibility of terminating the operation of the Accessories Store and leasing the facilities to another retailer. The monthly results of the Accessories Store operations are as follows: Sales P940,000 Operating expenses directly identifiable with the outlet: Cost of goods sold, etc P890,000 Depreciation 80,000 If operation of Accessories Store is terminated, Mr. Pans can rent-out the facilities for P60,000 a month to a non-competing business. Determine whether the company should continue operations or terminate the Accessories Store and rent-out the facilities. How much is the…Melinda Stoffers owns and operates ABC Print Co. During February, ABC incurred the following costs in acquiring two printing presses. One printing press was new, and the other was purchased from a business that recently filed for bankruptcy. Costs related to new printing press:1. Fee paid to factory representative for installation2. Freight3. Insurance while in transit4. New parts to replace those damaged in unloading5. Sales tax on purchase price6. Special foundation Costs related to used printing press:7. Fees paid to attorney to review purchase agreement8. Freight9. Installation10. Repair of damage incurred in reconditioning the press11. Replacement of worn-out parts12. Vandalism repairs during installationa. Indicate which costs incurred in acquiring the new printing press should be debited to the asset account.b. Indicate which costs incurred in acquiring the used printing press should be debited to the asset account.
- Mr. Pans owns and operates several retail auto parts and accessories outlets. Management is now considering the possibility of terminating the operation of the Accessories Store and leasing the facilities to another retailer. The monthly results of the Accessories Store operations are as follows: Sales P940,000 Operating expenses directly identifiable with the outlet: Cost of goods sold, etc P890,000 Depreciation 80,000 If operation of Accessories Store is terminated, Mr.Pans can rent-out the facilities for P60,000 a month to a non-competing business. Determine whether the company should continue operations or terminate the Accessories Store and rent-out the facilities. How much is the advantage of better option? 1. Continue the Accessories Store - advantage of P 50,000 2. Terminate operation of Accessories Store - advantage of P50,000 3. Continue the Accessories Store - advantage of P10,000 4. Terminate operation of Accessories Store - advantage of P10,000Ron Swanson owns Swanson’s Woodcraft Connection, a store dedicated to woodworking tools, supplies, and design plans. On May 1, Year One, Swanson’s purchased a new warehouse to store additional inventory to help meet customer demand. Ron paid $50,000 for the warehouse and estimates that it will be used for twenty years. Salvage value is $5,000 and Swanson uses the straight-line method of depreciation. Swanson’s Woodcraft Connection has a December 31st year-end. What is the amount of depreciation to be taken in Year One? The amount of depreciation to be taken in Year One is: $ Question 2 The amount of depreciation to be taken in Year Two is:$ Question 3 Now, assume that Swanson’s Woodcraft Connection applies the half-year convention. The amount of depreciation expense to be taken in Year One is: $ Question 4 Assuming that Swanson’s Woodcraft Connection applies the half-year convention. The amount of depreciation expense to be…Mr. Pans owns and operates several retail auto parts and accessories outlets. Management is now considering the possibility of terminating the operation of the Accessories Store and leasing the facilities to another retailer. The monthly results of the Accessories Store operations are as follows: Sales P940,000 · Operating expenses directly identifiable with the outlet: Cost of goods sold, etc P890,000 Depreciation 80,000 If operation of Accessories Store is terminated, Mr. Pans can rent-out the facilities for P60,000 a month to a non-competing business. Determine whether the company should continue operations or terminate the Accessories Store and rent-out the facilities. How much is the advantage of better option? 1. Coniinue the Accessories Store – advantage of P 50,000 2. Terminate operation of Accessories Store - advantage of P50,000 3. Continue the Accessories Store - advantage of P10,000 | 4. Terminate operation of Accessories Store - advantage of P10,000
- Joy's House of Cheese (stocks Cougar Cheese) purchases a tract of land and an existing building for $940,000. The company plans to remove the old building and construct a new building on the site in a few months. In addition to the purchase price, Joy's pays closing costs, including title insurance of $2,400. The company also pays $12,800 in property taxes, which includes $8,400 of back taxes (unpaid taxes from previous years) paid by Joy's on behalf of the seller and $4,400 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $47,000 to tear down the old building and remove it from the site. Joy is able to sell salvaged materials from the old building for $3,800 and pays an additional $10,400 to level the land to make it ready for use. Required: Determine the amount Joy's should record as the cost of the land. (Amounts to be deducted should be indicated by a minus sign.) Total cost of the land $Renee operates a proprietorship selling collectibles over the Web. This year, Renee's business reported revenue of $95.5 million and deducted $88.6 million in expenses and loss carryovers. Her business deductions included cost of goods sold of $48.5 million, sales commissions paid of $16.9 million, $10.5 million of interest paid on a mortgage, $10.7 million of depreciation, and $2 million deduction for a net operating loss carryover. c. Suppose that Renee's revenue includes $5 million of business interest income. What is the maximum amount of business interest expense that could be deducted this year under the business interest limitation? Note: Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places. Deductible Business Interest Expense millionRenee operates a proprietorship selling collectibles over the Web. This year, Renee's business reported revenue of $95.5 million and deducted $88.6 million in expenses and loss carryovers. Her business deductions included cost of goods sold of $48.5 million, sales commissions paid of $16.9 million, $10.5 million of interest paid on a mortgage, $10.7 million of depreciation, and $2 million deduction for a net operating loss carryover. a. What is Renee's adjusted taxable income for purposes of calculating the limitation on business interest expense? Note: Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 1 decimal place. Adjusted Taxable Income million