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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Chapter 7, Problem 7AP
a.
To determine
Calculate net
b.
To determine
Calculate the adjusted basis of the asset at the end of Year 1 and Year 2.
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10. PETRON Corporation sold a fixed asset for P100,000, which was also its book value. This isA. an investment cash flow and a source of funds.B. an operating cash flow and a source of funds.C. an operating cash flow and a use of funds.D. an investment cash flow and a use of funds.
11. SMART Corporation raises P500,000 in long-term debt to acquire additional plant capacity. This is consideredA. an investment cash flow.B. a financing cash flow.C. a financing cash flow and investment cash flow, respectively.D. a financing cash flow and operating cash flow, respectively.
12. All of the following are financing cash flows EXCEPTA. sale of stock.B. payment of stock dividends.C. increasing debt.D. repurchasing stock.
13. All of the following are operating cash flows EXCEPTA. net profit/earnings after tax.B. increase or decrease in current liabilities.C. increase or decrease in fixed assets.D. depreciation expense.
QUESTION 5
Below are relevant extracts from Pitzer Bhd's financial statements for the financial year ended
31 December 2020 and 31 December 2021:
2020 (RM)
2021 (RM)
ASSETS:
Freehold land
Plant and machinery at cost
Inventories
Bank
Tax recoverable
386,000
182,000
44,000
13,000
6,000
20,000
86,400
737,400
477,000
212,000
52,000
55,000
Fixed deposits
Account receivables
27,000
97,200
920,200
LIABILITIES & EQUITIES
Ordinary Share Capital
General reserve
Retained earnings
5% Bank loan
Bank overdraft
Account payables
Tax payable
Accumulated depreciation of Plant & Machinery
264,000
112,420
36,400
169,400
13,400
69,780
364,000
112,420
135,280
135,400
7,600
62,340
9,960
93,200
920,200
72,000
737,400
*Note: These amounts are used for depreciation calculations. Assume further that Mendoza is subject to a 3
0% income tax, both for ordinary income and gains/losses associated with disposal of machinery, and that
all cash flows occur at the end of the year, except for the initial investment. Assume that straight-line
depreciation is used for tax purposes and that any tax associated with the disposal of machinery occurs at
the same time of the related transaction. Required: Determine relevant cash flows (after-tax) at time of
purchase of the new machine (i.e., time 0: January 1, 2019). Determine the relevant (after-tax) cash inflow
each year of project operation (i.e., at the end of each of years 1 through 5). Determine the relevant (after-
tax) cash inflow at the end of the project's life (i.e., at the project's disposal time, December 31, 2023).
Determine the undiscounted net cash flow (after tax) for the new machine and determine whether on this
basis the old machine should be…
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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