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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Question
Chapter 7, Problem 33AP
a.
To determine
Determine the cost basis of the
b.
To determine
Determine amortization deduction.
c.
To determine
Determine
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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)
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355 $
20.5
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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…
On July 1 of year 1, Riverside Corporation (RC), a calendar-year taxpayer, acquired the assets of another business in a taxable
acquisition. When the purchase price was allocated to the assets purchased, RC determined it had purchased $2.115.000 of goodwill
for both book and tax purposes. At the end of year 1, RC determined that the goodwill had not been impaired during the year. In year
2. however, RC concluded that $350,000 of the goodwill had been impaired and wrote down the goodwill by $350,000 for book
purposes.
Required:
a. What book-tax difference associated with its goodwill should RC report in year 1? Is it favorable or unfavorable? Is it permanent or
temporary?
b. What book-tax difference associated with its goodwill should RC report in year 2? Is it favorable or unfavorable? Is it permanent or
temporary?
Complete this question by entering your answers in the tabs below.
In year 1, Firm A paid $49,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,040 and $6,600
depreciation with respect to the asset. Firm A's marginal tax rate in both years was 21 percent.
Required:
a. Compute Firm A's net cash flow attributable to the asset purchase in each year.
b. Compute Firm A's adjusted basis in the asset at the end of each year.
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Firm A's net cash flow attributable to the asset purchase in each year.
Note: Cash outflows should be indicated by a minus sign. Round your intermediate calculations and final answers to nearest
whole dollar amount.
Before-tax cash flows
Tax (cost) or savings
Net cash flow
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Year 2
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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