The LeMond Corporation just purchased a new production line. Assume that the firmplanned to depreciate the equipment over 5 years on a straight-line basis, butCongress then passed a provision that requires the company to depreciate theequipment on a straight-line basis over 7 years. Other things held constant, which ofthe following will occur as a result of this Congressional action? Assume that thecompany uses the same depreciation method for tax and stockholder reportingpurposes.LeMond's taxable income will be lower.LeMond's cash position will decrease.LeMond's tax liability for the year will be lower.LeMond's reported net income after taxes for the year will be lower.LeMond's net fixed assets as shown on the balance sheet will be lower at the end ofthe year.

In straight line depreciation there is uniform annual depreciation of equipment over the life of…

Answered: The LeMond Corporation just purchased a…

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter8: Depreciation And Sale Of Business Property

Section: Chapter Questions

Problem 5MCQ: Which of the following statements with respect to the depreciation of property under MACRS is...

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4. Which of the following situations would not be permitted to defer the recognition of any recapture that might arise from the disposition of an asset? A building that was used for income earning purposes was destroyed in a flood. Insurance proceeds were received which generated recapture. A new building was built 18 months later. B A piece of equipment that belonged to a company was stolen in November 2019. Insurance proceeds were received which generated recapture. The equipment was replaced in December of 2020. A piece of equipment that belonged to a construction company was sold in June 2019. The proceeds from the sale generated recapture. A new piece of equipment was purchased in January of 2020. The company's fiscal year-end is December 31st. D. A building that was used for income earning purposes was sold in December 2019. The proceeds from the sale generated recapture. A new building was purchased in April 2020. The company's fiscal year-end is December 31st. none of the above
Use this information to answer the following 12 questions: Jefferson Company acquired equipment on January 2, Year 1, at a cost of $10 million. The equipment has a five-year life, no residual value, and is depreciated on a straight-line basis. On January 2, Year 3, Jefferson Company determines the fair value of the asset (net of any accumulated depreciation) to be $12 million. Determine the impact the equipment has on Jefferson Company's income in Year 1 using IFRS, assuming the revaluation method is used for measurement subsequent to initial recognition.
Which of the following companies has a disclosure for which FASB ASC 450 applies, but FASB ASC 275 does not? O Comfort House has a loss contingency at the financial statement date, and it is remotely A. possible that the estimate for this contingency will change by a material amount within the next year. B. The Garden Foundation has an asset on which the depreciation will be recalculated due to the life of the assets being extended. C. The Summer Group has equipment that will be written down. D. The Winter Group has an intangible asset that needs to be written down.
Madison Company acquired equipment on January 2, Year 1, at a cost of $20 million. The equipment has a five-year life, no residual value, and is depreciated on a straight-line basis. On January 2, Year 4, Jefferson Company determines the fair value of the asset (net of any accumulated depreciation) to be $12 million. Assuming that (1) the revaluation model is used for measurement subsequent to initial recognition under IFRS and (2) US GAAP: Depreciation expense for Year 4 will be: Select one:a. US GAAP: 2000,000 IFRS 4,000,000b. US GAAP: 4000,000 IFRS 6,000,000c. US GAAP: 4000,000 IFRS 4,000,000d. US GAAP: 2000,000 IFRS 2,000,000
[The following information applies to the questions displayed below.] Dog Co. acquired and placed in service the following assets during the year: Date Cost Asset Placed in Service Basis Computer equipment 3/9 $ 15,800 Furniture 5/23 23,200 Commercial building 10/19 347,000 Assuming Dog Co. does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) b. What is Dog Co.'s year 3 cost recovery for each asset if Dog Co. sells all of these assets on 4/16 of year 3?
Which of the following statements with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. If a taxpayer elects to use the straight-line method of depreciation for property in the 5 -year class, all other 5 -year class property acquired during the year must also be depreciated using the straight-line method. In some cases, when a taxpayer places a significant amount of property in service during the last quarter of the year, real property must be depreciated using a mid-quarter convention. Real property acquired after 1986 must be depreciated using the straight-line method. The cost of property to which the MACRS rate is applied is not reduced for estimated salvage value.
Assume the same information as in RE11-3, except that Albany Corporation purchased the asset on April 1, Year 1. Calculate the depreciation for Year 1 and Year 2 using the double-declining-balance method. Round to the nearest dollar.
Washburn Company spent $10 million to purchase a new patented technology, debiting an intangible asset and crediting cash. Washburn uses SYD depreciation on its depreciable assets and plans to amortize the intangible asset on a straight-line basis. The appropriate accounting treatment is that Washburn Multiple Choice о is not required to make any accounting adjustments. о is required to adjust a change in accounting estimate prospectively. О has made a change in accounting principle, requiring retrospective adjustment. О needs to correct an accounting error.
Check my work ! Required information [The following information applies to the questions displayed below.] Dain's Diamond Bit Drilling purchased the following assets this year. Purchase Original Asset Date Basis Drill bits (5-year) Drill bits (5-year) Commercial building January 25 July 25 April 22 $ 88,500 101,250 251,000 Assume its taxable income for the year was $60,000 for purposes of computing the §179 expense (assume no bonus depreciation). (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Leave no answer blank. Enter zero if applicable.) c. If the January drill bits' original basis was $2,514,000, what is the maximum amount of §179 expense Dain's may deduct for the year?
Required Information [The following information applies to the questions displayed below.] Wapato Corporation purchased a new plece of equipment at the beginning of Year 1 for $1,000,000. The expected life of the asset is 20 years with no residual value. The company uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes (the accelerated method results in $120,000 of depreciation In Year 1 and $100,000 of depreciation in Year 2). The company's federal Income tax rate is 21 percent. The company determined its Income tax obligations for Year 1 and Year 2 were $400,000 and $625,000, respectively. Required: 1-a. Compute the deferred Income tax amount reported on the balance sheet for each year. 1-b. Is the deferred Income tax a liability or an asset? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Compute the deferred income tax amount reported on the balance sheet for each year. Deferred Income Tax Year…
[The following information applies to the questions displayed below.] Wapato Corporation purchased a new piece of equipment at the beginning of Year 1 for $1,010,000. The expected life of the asset is 25 years with no residual value. The company uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes (the accelerated method results in $121,200 of depreciation in Year 1 and $101,000 of depreciation in Year 2). The company's federal income tax rate is 21 percent. The company determined its income tax obligations for Year 1 and Year 2 were $401,000 and $633,000, respectively. Required: 1-a. Compute the deferred income tax amount reported on the balance sheet for each year. 1-b. Is the deferred income tax a liability or an asset? Complete this question by entering your answers in the tabs below. Req la X Answer is complete but not entirely correct. Req 1b Year 1 Year 2 Compute the deferred income tax amount reported on the balance…
Hauswirth Corporation sold (or exchanged) a warehouse in year 0. Hauswirth bought the warehouse several years ago for $72.500. and it has claimed $24,800 of depreciation expense against the building. Required: a. Assuming that Houswirth receives $59,700 in cash for the warehouse, compute the amount and character of Hauswirth's recognized gain or loss on the sale. b. Assuming that Hauswirth exchanges the warehouse in a like-kind exchange for some land with a fair market value of $59,700 compute Houswirth's realized gain or loss, recognized gain or loss, deferred gain or loss, and basis in the new land. c. Assuming that Houswirth receives $26.500 in cash in year 0 and a $57,000 note receivable that is payable in year 1, compute the amount and character of Hauswirth's gain or loss in year 0 and in year 1. Complete this question by entering your answers in the tabs below. Required a Required b Required c Assuming that Hauswirth receives $59,700 in cash for the warehouse, compute the amount…

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