Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 6, Problem 14AP
Warren Company is a calendar year, cash basis firm. On December 6, 2019, Warren paid $7,200 cash to a landscape service business that maintains the lawns and gardens around Warren’s headquarters. How much of this expenditure can Warren deduct in 2019 assuming that:
- a. The expenditure is a prepayment for four months of landscape maintenance beginning May 1, 2020?
- b. The expenditure is a prepayment for 12 months of landscape maintenance beginning May 1, 2020?
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BUG Company constructed an asset for its own use. Construction started on January 1, 2019 and the asset was completed on December 31,2019. Expenditures incurred during the year were as follows:
January 1- $400,000
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August 14- $480,000
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On December 31, 2019, Riverbed Inc. borrowed $3,660,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $439,200; June 1, $732,000; July 1, $1,830,000; December 1, $1,830,000. The building was completed in February 2021. Additional information is provided as follows.
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6-year, 11% note, dated December 31, 2017, interest payable annually
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Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…
On December 31, 2019, Riverbed Inc. borrowed $3,660,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $439,200; June 1, $732,000; July 1, $1,830,000; December 1, $1,830,000. The building was completed in February 2021. Additional information is provided as follows.
1.
Other debt outstanding
10-year, 14% bond, December 31, 2013, interest payable annually
$4,880,000
6-year, 11% note, dated December 31, 2017, interest payable annually
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2.
March 1, 2020, expenditure included land costs of $183,000
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Interest revenue earned in 2020
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The amount of interest
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Chapter 6 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
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