Test Your Understanding 2: Fatima Trading Company's Income Statement has shown RO 128,000 profit for the year 2021. Since the accountant of the company is new to Oman and not aware about all the rules of Law of Income Tax on Omani Companies. Indeed, he is not sure about the following transactions he has recorded in the company account books. 1. Company purchased patent worth RO 14000 in the year 2021. The life of patent is 14 years. The accountant expensed the cost of patent 2. The company accountant charged depreciation on the following assets cost at the rate 8% and 30% respectively: (i) Building cost RO40000 (ii) Equipment cost RO20000 The rate of depreciation on such assets as per taxation law of Oman recommended 4% and 33.33% respectively. 3. The opening inventory is undervalued by RO1500 and closing inventory is overvalued by RO12004. Bad debts of RO1500 recovered in the current year, which was written off in concerned previous year profit. This amount is not included in the profit given above. 5. The company had incurred an amount of RO23000 on inaugurating their business outlet. This amount is deducted in calculating the profit. However, the Secretariat General of income tax department declared RO4000 inappropriate because of non- availability of documentary evidence. 6. The company earned capital gain of RO2300 on disposal of securities listed in MSM. Such gain is included in the profit. 7. The company sustained the loss of RO1500 in the year 2017. This loss accountant carried forward and set - off from this year profit. Requirement: Calculate the taxable profit and the tax liability to be paid by the company.

Isaac Inc. began operations in January 2021. For some property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2021, Isaac had $676 million in sales of this type. Scheduled collections for these sales are as follows:            2021 $ 83 million   2022   137 million   2023   129 million   2024   162 million   2025   165 million     $ 676 million      Assume that Isaac has a 25% income tax rate and that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses, what deferred tax liability would Isaac report in its year-end 2021 balance sheet?

Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company’s tax accounting balance sheet. The relevant information is summarized as follows: Note: Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.   FMV Adjusted Tax Basis Appreciation Cash $ 10,000 $ 10,000   Receivables 15,000 15,000   Building 100,000 50,000 50,000 Land 225,000 75,000 150,000 Total $ 350,000 $ 150,000 $ 200,000         Payables $ 18,000 $ 18,000   Mortgage* 112,000 112,000   Total $ 130,000 $ 130,000   * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price…