Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 2, Problem 1CIC
To determine
Identify the situation that would give rise to
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Students are asked to access the link given below and explain how Amazon manages to avoid paying Federal Income Taxes? Explain what other methods/ or ways businesses can use to avoid paying income taxes and how? Your explanation needs to satisfy the question
QUESTION 1
A) By way of an example , state the difference between an “Exempt supply and a “Zero -rated supply” ?
B) A second dealer buys a used fridge from a non-vendor for NAD 600 for resale. He pays the person NAD 400 immediately and the balance of NAD 200 in the next VAT period. Calculate the input tax that the second hand dealer will be entitled to claim ?
C) A vendor purchases a VEHICLE for private purposes on 1 March 2020. The VEHICLE costs NAD228 000 including VAT (excludes finance charges and any other charges incurred). The vendor then decides to use the VEHICLE exclusively in his business for delivery of goods to his/her customers with effect from1 March 2020. At the time of introducing the VEHICLE into the business, it had an open market value of NAD205 200. Calculate input VAT to be claimed by the vendor?
c. Intuit Inc. develops tax preparation software that it sells to its customers for a flat fee. No further
Explain when each of the following businesses fulfills the performance obligations implicit in the sales
b. Oracle Corp. develops general ledger and other business application software that it sells to its
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a. RealMoney.Com, a division of TheStreet Inc., provides investment advice to customers for an up
front fee. It provides these customers with password-protected access to its website, where they
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Assessing Revenue Recognition Timing and Income Measurem
contract and recognizes revenue. Identify any revenue measurement ISsues that could arise
can download investment reports. RealMoney has an obligation to provide updates on its they
customers. The customer pays an up-front fee for the right to use the software and a monthly its
support services.
payment is required, and the software cannot be returned, only exchanged if defective.
d. Electronic Arts develops and sells…
Chapter 2 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 2 - Prob. 1QECh. 2 - Asset Valuation and Income Recognition. Asset...Ch. 2 - Trade-Offs among Acceptable Accounting...Ch. 2 - Income Flows versus Cash Flows. The text states,...Ch. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Computation of Income Tax Expense. A firms income...Ch. 2 - Computation of Income Tax Expense. A firms income...
Ch. 2 - Costs to Be Included in Historical Cost Valuation....Ch. 2 - Effect of Valuation Method for Nonmonetary Asset...Ch. 2 - Prob. 13PCCh. 2 - Prob. 14PCCh. 2 - Prob. 15PCCh. 2 - Deferred Tax Assets. Components of the deferred...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Interpreting Income Tax Disclosures. Prepaid Legal...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Analyzing Transactions. Using the analytical...Ch. 2 - Prob. 21PCCh. 2 - Starbucks The financial statements of Starbucks...Ch. 2 - Prob. 1BICCh. 2 - Prob. 1CICCh. 2 - Prob. 1DICCh. 2 - Prob. 1EICCh. 2 - Prob. 1FICCh. 2 - Starbucks The financial statements of Starbucks...
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- Starbucks The financial statements of Starbucks Corporation are presented in Exhibits 1.26-1.28 (see pages 74-77). The income tax note to those financial statements reveals the information regarding income taxes shown in Exhibit 2.18. REQUIRED Starbucks uses the straight-line depreciation method for financial reporting and accelerated depreciation for income tax reporting. Like most firms, the largest deferred tax liability is for property, plant, and equipment (depreciation). Explain how depreciation leads to a deferred tax liability. Suggest possible reasons why the amount of the deferred tax liability related to depreciation increased between 2011 and 2012.arrow_forwardStarbucks The financial statements of Starbucks Corporation are presented in Exhibits 1.261.28 (see pages 7477). The income tax note to those financial statements reveals the information regarding income taxes shown in Exhibit 2.18. REQUIRED Assuming that Starbucks had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for 2012? Explain.arrow_forwardAccess the 2016 financial statements and related disclosure notes of Ford Motor Company from its website at corporate.ford.com. Required: 1. In Note 21, find Ford's net deferred tax asset or liability. What is that number? 2. Does Ford show a valuation allowance against deferred tax assets? If so, what is the number, and what is Ford's explanation for it? 3-a. Does Ford have any NOL carryforwards? 3-b. What is the amount of any carryforward, what deferred tax asset or liability is associated with it? (Round your answer to 1 decimal place.) 3-c. What effective tax rate does that imply was used to calculate its deferred tax effect?arrow_forward
- Tennis Shoe Warehouse operates in a state with a 6.5% sales tax. For convenience, Tennis Shoe Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collected from each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales taxes, ……Select one:a. net income will be understated and liabilities will be overstated.b. net income will be overstated and liabilities will be overstated.c. net income will be understated and liabilities will be understated.d. net income will be overstated and liabilities will be understated.arrow_forwardIV. Value Added Tax (VAT) - A retailer buys an article from the wholesaler at OMR 1,800 and the wholesaler charges a sales tax at the rate prescribed rate of 5%. The retailer fixes the price at OMR 2,000 and charges sales tax at the same rate. Apply VAT system of sales tax calculation to answer the following. A. Find the input tax and output tax for the retailer. B. Discuss why the government would impose VATarrow_forward1) What should companies consider regarding sales tax for online transactions versus in-person transaction. 2) Based on the risk levels you calculated for the zip codes that Dillard’s sells to, what would your recommendation be to Dillard’s regarding purchasing tax software versus using freely available rate tables? 3) Recognizing that the Wayfair decision continues to impact state tax laws regarding online sales, what factors would you take into account for a company that is beginning to embrace online sales and is deciding whether to invest in tax software versus using freely available rate tables?arrow_forward
- Which of the following statements is true about sales tax? O a. Sales tax is collected by retailers from customers to be paid to tax authorities later. O b. Sales tax is recorded and paid by customers to tax authorities. O c. Sales tax is not required to be mentioned in the sales invoice prepared by a seller. O d. Sales tax is the amount of discount extended to customers by retailers to be disclosed to tax authorities.arrow_forwardQUESTION: Answer the question below using 2-5 sentences ONLY. 1.) Is it fair for small businesses (like a sari-sari store) to be obliged to pay tax? Why or why not?arrow_forwardMelanie operates Mel's Bakery in Foxboro, Massachusetts, and has retail stores in Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island. Mel's Bakery also ships specialty breads nationwide upon request. Determine Mel's Bakery's sales tax collection responsibility and calculate the sales tax liability for Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island, and Texas, based on the following information: Note: Leave no answer blank. Enter zero if applicable. The New Hampshire retail stores have $286,000 of dine-in sales. New Hampshire is one of five states with no sales tax. However, it has a room and meals tax rate of 8 percent. New Hampshire considers any food or beverage served by a restaurant for consumption on or off the premises to be a meal. Mel's Bakery's Rhode Island stores earn $336,000 in sales. The Rhode Island sales tax rate is 7 percent and its restaurant surtax is 1 percent. Rhode Island considers Mel's Bakery to be a restaurant because its retail…arrow_forward
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