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 7, Problem 23AP
In 2019, Firm L purchased machinery costing $21,300 and elected to expense the entire cost under Section 179. How much of the expense can Firm L deduct in each of the following cases?
- a. Its taxable income before the deduction was $58,000.
- b. Its taxable income before the deduction was $19,200.
- c. Its net operating loss (NOL) before the deduction was $5,016.
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In 2022, Firm L purchased machinery costing $21,300 and elected to expense the entire cost under Section 179.
Required:
a. How much of the expense can Firm L deduct if its taxable income before the deduction was $58,000.
b. How much of the expense can Firm L deduct if its taxable income before the deduction was $19,200.
c. How much of the expense can Firm L deduct if its net operating loss (NOL) before the deduction was $5,016.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
How much of the expense can Firm L deduct if its taxable income before the deduction was $58,000.
Deduction
In 2020, Company W elected under Section 179 to expense $19,300 of the cost of qualifying property. However, it could deduct only
$15,000 of the expense because of the taxable income limitation. In 2021, Company W's taxable income before any Section 179
deduction was $1,812,000.
Required:
a. Compute its 2021 Section 179 deduction if the total cost of qualifying property purchased in 2021 was $13,600.
b. Compute its 2021 Section 179 deduction if the total cost of qualifying property purchased in 2021 was $1,048,000.
Complete this question by entering your answers in the tabs below.
Answer is complete but not entirely correct.
Required A Required B
Compute its 2021 Section 179 deduction if the total cost of qualifying property purchased in 2021 was $1,048,000.
Deduction
$ 1,040,000 X
Ayres Services acquired an asset for $200 million in 2021. The asset is depreciated for financial reporting purposes
over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS.
The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022,
2023, and 2024 are as follows:
2021
$405 $425
($ in millions)
2022 2023 2024
$440
Pretax accounting income
Depreciation on the income
statement
Depreciation on the tax
return
$475
50
50
50
50
(64)
(84)
(30)
(22)
Taxable income
$391 $391
$460
$503
Required:
For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset
and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "O" wherever
applicable. Enter your answers in millions rounded to 2 decimal place (i.e., 5,500,000 should be entered as 5.50).)
Beginning of End of
2021
End of
End of
End…
Chapter 7 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 7 - Prob. 1QPDCh. 7 - Assume that Congress enacted legislation requiring...Ch. 7 - Prob. 3QPDCh. 7 - To what extent do cost recovery deductions based...Ch. 7 - Can a firm have a negative tax basis in an asset?Ch. 7 - Prob. 6QPDCh. 7 - Corporation J manufactures electrical appliances....Ch. 7 - Identify the tax and nontax issues that firms must...Ch. 7 - Identify four possible differences in the...Ch. 7 - Prob. 10QPD
Ch. 7 - Prob. 11QPDCh. 7 - Prob. 12QPDCh. 7 - Prob. 13QPDCh. 7 - Prob. 14QPDCh. 7 - Prob. 15QPDCh. 7 - Prob. 16QPDCh. 7 - Prob. 17QPDCh. 7 - Prob. 18QPDCh. 7 - Prob. 1APCh. 7 - Assuming a 21 percent tax rate, compute the...Ch. 7 - Determine the tax basis of the business asset...Ch. 7 - ABC Company purchased business property several...Ch. 7 - Early this year, ZeZe Inc. paid a 52,000 legal fee...Ch. 7 - In year 1, Firm A paid 50,000 cash to purchase a...Ch. 7 - Prob. 7APCh. 7 - Hansen Company, a cash basis taxpayer, paid 50,000...Ch. 7 - In year 0, Jarmex paid 55,000 for an overhaul of a...Ch. 7 - Prob. 10APCh. 7 - Refer to the facts in problem 10. In its second...Ch. 7 - In its first year of operations, Lima Company...Ch. 7 - Prob. 13APCh. 7 - Herelt Inc., a calendar year taxpayer, purchased...Ch. 7 - Knute Company purchased only one asset during its...Ch. 7 - Prob. 16APCh. 7 - Suber Inc., a calendar year taxpayer, purchased...Ch. 7 - Prob. 18APCh. 7 - Prob. 19APCh. 7 - On May 12, 2018, Nelson Inc. purchased eight...Ch. 7 - In March 2018, Jones Company purchased a Mercedes...Ch. 7 - Margo, a calendar year taxpayer, paid 580,000 for...Ch. 7 - In 2019, Firm L purchased machinery costing 21,300...Ch. 7 - In 2018, Company W elected under Section 179 to...Ch. 7 - Prob. 25APCh. 7 - At the beginning of its 2019 tax year, Hiram owned...Ch. 7 - In April 2019, Lenape Corporation completed...Ch. 7 - Ajax Inc. was formed on April 25 and elected a...Ch. 7 - Prob. 29APCh. 7 - Mr. Z, a calendar year taxpayer, opened a new car...Ch. 7 - Prob. 31APCh. 7 - Prob. 32APCh. 7 - Prob. 33APCh. 7 - Prob. 34APCh. 7 - Prob. 35APCh. 7 - Prob. 36APCh. 7 - Prob. 37APCh. 7 - Prob. 1IRPCh. 7 - Prob. 2IRPCh. 7 - Prob. 3IRPCh. 7 - Prob. 4IRPCh. 7 - Prob. 5IRPCh. 7 - Prob. 6IRPCh. 7 - Prob. 7IRPCh. 7 - Prob. 8IRPCh. 7 - Prob. 9IRPCh. 7 - Prob. 10IRPCh. 7 - Prob. 1RPCh. 7 - Prob. 2RPCh. 7 - Prob. 3RPCh. 7 - Prob. 4RPCh. 7 - Prob. 1TPCCh. 7 - Prob. 2TPCCh. 7 - Prob. 3TPCCh. 7 - Prob. 4TPC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350arrow_forwardIronwood Corporation has ordinary taxable income of $65,000 in 2019, and a short-term capital loss of $15,000. What is the corporation's tax liability for 2019? $7,500 $5,250 $10,500 $13,650 None of the abovearrow_forwardAMP Corporation (calendar-year-end) has 2019 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2019, AMP acquired the following assets:   Placed in   Asset Service  Basis Machinery September 12 $ 1,470,000 Computer equipment February 10  455,000 Office building April 2  570,000 Total  $ 2,495,000   a. What is the maximum amount of §179 expense AMP may deduct for 2019?  B. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2019 on the assets it placed in service in 2019, assuming no bonus depreciation?arrow_forward
- Ayres Services acquired an asset for $82 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return. Taxable income. ($ in millions) 2019 355 $ 20.5 (33.5) Temporary Difference Deferred Tax Liability 2018 $ 335 $ 20.5 (25.5) $ 330 $ 342 $ 375 2020 2021 370 $ 405 20.5 20.5 (15.5) (7.5) $ 418 Required: Determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should…arrow_forwardPrior to 2019, the accounting income and taxable income for Sheffield Corporation were the same. On January 1, 2019, the company purchased equipment at a cost of $1,116,000. For accounting purposes, the equipment was to be depreciated over six years using the straight-line method and no residual value. For income tax purposes, the equipment was subject to a CCA rate of 30% (half-year rule applies for 2019). Sheffield's income before tax for accounting purposes for 2020 was $13,000,000. The company was subject to a 20% income tax rate for all applicable years and anticipated profitable years for the foreseeable future. Sheffield follows IFRS. Calculate taxable income and taxes payable for 2020. Taxable income Income taxes payable $ eTextbook and Media List of Accounts %24 %24arrow_forwardAyres Services acquired an asset for $128 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows:  ($ in millions)   2021  2022  2023  2024  Pretax accounting income $ 360   $ 380   $ 395   $ 430   Depreciation on the income statement  32    32    32    32   Depreciation on the tax return  (55 )   (39 )   (21 )   (13 )  Taxable income $ 337   $ 373   $ 406   $ 449    Required:For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions…arrow_forward
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