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 8, Problem 7IRP
Firm WD sold
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Holt Co. discovered that in the prior year, it failed to report P40,000 of depreciation related to a newly constructed building. The depreciation was computed correctly for tax purposes. The tax rate for the current year was 20%. How should Holt report the correction in the error in the current year
-as an increase in accumulated depreciation of P40,000
-as an increase of depreciation expense of P40,000
-as an increase in depreciation expense of P32,000
-as an increase in accumulated depreciation of P32,000
Bowtock purchased an item of plant for $2,000,000 on 1 October 2000. It had an estimated life of eight years and an estimated residual value of $400,000. The plant is depreciated on straight-line basis. The tax authorities do not allow depreciation as a deductible expense.Instead, a tax expense of 40% of the cost of this type of asset can be claimed against income tax in the year of purchase and 20% per annum (on a reducing balance basis) of its tax base thereafter. The rate of income tax can be taken as 25%.
REQUIRED:In respect of the above item of plant, calculate the deferred tax charge/credit in Bowtock’s income statement for the year to 30 September 2003 and the deferred tax balance in the balance sheet at that date. Note: work to the nearest $000
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.
Chapter 8 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 8 - BBB Company, which manufactures industrial...Ch. 8 - Prob. 2QPDCh. 8 - Prob. 3QPDCh. 8 - Prob. 4QPDCh. 8 - Does the characterization of gain or loss as...Ch. 8 - Distinguish between a firms tax basis in an asset...Ch. 8 - Both Corporation A and Corporation Z have business...Ch. 8 - Mrs. Carly called her accountant with a question....Ch. 8 - Prob. 9QPDCh. 8 - Mr. K realized a loss on the sale of an asset to...
Ch. 8 - Prob. 11QPDCh. 8 - Prob. 12QPDCh. 8 - Prob. 13QPDCh. 8 - Prob. 14QPDCh. 8 - Prob. 1APCh. 8 - Several years ago, PTR purchased business...Ch. 8 - Prob. 3APCh. 8 - Prob. 4APCh. 8 - Prob. 5APCh. 8 - Prob. 6APCh. 8 - TPW, a calendar year taxpayer, sold land with a...Ch. 8 - Refer to the facts in the preceding problem and...Ch. 8 - Refer to the facts in problem 7. In the first year...Ch. 8 - Prob. 10APCh. 8 - Prob. 11APCh. 8 - In year 1, Aldo sold investment land with a 61,000...Ch. 8 - Prob. 13APCh. 8 - Prob. 14APCh. 8 - Silo Inc. sold investment land to PPR Inc. for...Ch. 8 - Prob. 16APCh. 8 - Prob. 17APCh. 8 - Prob. 18APCh. 8 - Shenandoah Skies is the name of an oil painting by...Ch. 8 - Koil Corporation generated 718,400 ordinary income...Ch. 8 - Prob. 21APCh. 8 - Alto Corporation sold two capital assets this...Ch. 8 - Zeno Inc. sold two capital assets in 2019. The...Ch. 8 - Prob. 24APCh. 8 - Prob. 25APCh. 8 - Firm OCS sold business equipment with a 20,000...Ch. 8 - Prob. 27APCh. 8 - Prob. 28APCh. 8 - This year, QIO Company generated 192,400 income...Ch. 8 - Prob. 30APCh. 8 - Prob. 31APCh. 8 - Since its formation, Roof Corporation has incurred...Ch. 8 - Corporation Q, a calendar year taxpayer, has...Ch. 8 - Prob. 34APCh. 8 - Firm P, a noncorporate taxpayer, purchased...Ch. 8 - Prob. 36APCh. 8 - Prob. 37APCh. 8 - Prob. 38APCh. 8 - A taxpayer owned 1,000 shares of common stock in...Ch. 8 - Prob. 40APCh. 8 - Prob. 41APCh. 8 - Prob. 42APCh. 8 - Prob. 43APCh. 8 - A fire recently destroyed a warehouse owned by...Ch. 8 - Prob. 45APCh. 8 - Bali Inc. reported 605,800 net income before tax...Ch. 8 - Prob. 47APCh. 8 - Prob. 48APCh. 8 - Prob. 49APCh. 8 - Prob. 1IRPCh. 8 - Prob. 2IRPCh. 8 - Prob. 3IRPCh. 8 - Prob. 4IRPCh. 8 - Prob. 5IRPCh. 8 - Prob. 6IRPCh. 8 - Firm WD sold depreciable realty for 225,000. The...Ch. 8 - Prob. 8IRPCh. 8 - Prob. 9IRPCh. 8 - Prob. 10IRPCh. 8 - Prob. 11IRPCh. 8 - For the past 12 years, George Link has operated...Ch. 8 - Prob. 2RPCh. 8 - Prob. 3RPCh. 8 - Prob. 4RPCh. 8 - Firm Z, a corporation with a 21 percent tax rate,...Ch. 8 - Mr. RH purchased 30 acres of undeveloped ranch...Ch. 8 - Prob. 3TPCCh. 8 - Prob. 4TPCCh. 8 - Prob. 5TPC
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- Simpson company purchased an asset by paying $50,000 cash and giving the seller a promissory note which requires payment of the remaining balance of $300,000 over 3 years. The company's book basis and tax basis in the asset is $350,000. TRUE or FALSEarrow_forwardOn 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 $1,800,000 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 $390,000 of the goodwill had been impaired and wrote down the goodwill by $390,000 for book purposes. Required 1. What book-tax difference associated with its goodwill should RC report in year 1? Is it favorable or unfavorable? Is it permanent or temporary? Book-tax difference Is it favorable or unfavorable? Is it permanent or temporary? Show Transcribed Text 2. What book-tax difference associated with its goodwill should RC report in year 2? Is it favorable or unfavorable? Is it permanent or temporary? Book-tax difference Is it favorable or unfavorable? Is it permanent or…arrow_forwardHauswirth Corporation sold (or exchanged) a warehouse in year 0. Hauswirth bought the warehouse several years ago for $72.500. and it has claimed $24,800 of depreciation expense against the building. Required: a. Assuming that Houswirth receives $59,700 in cash for the warehouse, compute the amount and character of Hauswirth's recognized gain or loss on the sale. b. Assuming that Hauswirth exchanges the warehouse in a like-kind exchange for some land with a fair market value of $59,700 compute Houswirth's realized gain or loss, recognized gain or loss, deferred gain or loss, and basis in the new land. c. Assuming that Houswirth receives $26.500 in cash in year 0 and a $57,000 note receivable that is payable in year 1, compute the amount and character of Hauswirth's gain or loss in year 0 and in year 1. Complete this question by entering your answers in the tabs below. Required a Required b Required c Assuming that Hauswirth receives $59,700 in cash for the warehouse, compute the amount…arrow_forward
- 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 $2,106,000 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 $460,000 of the goodwill had been impaired and wrote down the goodwill by $460,000 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. Req A Req Barrow_forwardSeveral years ago, PTR purchased business equipment for $50,000. PTR’saccumulated book depreciation with respect to the equipment is $37,200, and itsaccumulated tax depreciation is $41,000.Required:a.Compute PTR’s book and tax basis in the equipment.b. Using a 21 percent tax rate, compute PTR’s deferred tax asset or liability (identifywhich) resulting from the difference between accumulated book and taxdepreciation.c. Compute PTR’s book and tax gain if it sells the equipment for $14,750.arrow_forwardOn 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 $1,710,000 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 $670,000 of the goodwill had been impaired and wrote down the goodwill by $670,000 for book purposes. Required: What book–tax difference associated with its goodwill should RC report in year 1? Is it favorable or unfavorable? Is it permanent or temporary? What book–tax difference associated with its goodwill should RC report in year 2? Is it favorable or unfavorable? Is it permanent or temporary?arrow_forward
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- Miller Co. discovered that in the prior year, it failed to report $40,000 of depreciation related to a newly constructed building. The depreciation was computed correctly for tax purposes. The tax rate for the current year was 40%. What was the impact of the error on Miller’s financial statements for the prior year? Understatement of net income of $24,000. Understatement of accumulated depreciation of $40,000. Understatement of depreciation expense of $24,000. Understatement of accumulated depreciation of $24,000.arrow_forwardMallow Incorporated, which has a 21% tax rate, purchased a new business asset. First-year book depreciation was $37,225, and first-year MACRS depreciation was $55,025. As a result of this book/tax difference, Mallow recorded a $3,738 deferred tax asset. True or False True Falsearrow_forwardBrennen sold a machine used in his business for $268,200. The machine was purchased eight years ago for $482,760. Depreciation up to the date of the sale for regular income tax purposes was $308,430 and $277,587 for AMT purposes. What AMT adjustment arises as a result of the sale of the machine? For AMT purposes, Brennen has a negative adjustment of $------- related to the sale?arrow_forward
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