Because of a shortage of working capital the company was forced to sell off some land for $300,000 in February of the current year. The land had been bought in October 1995 at a cost of $180,000. The company only brought to account in its financial statements the difference between the current market value of $220,000 and the proceeds, namely $300,000, as their accounting gain on sale. The company directors come to you as the taxation adviser of the company and wish to know how each of the items mentioned above are to be treated for taxation purposes.
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- You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: 1. Pretax accounting income was $50 million and taxable income was $6 million for the year ended December 31, 2021. 2. The difference was due to three items: a. Tax depreciation exceeds book depreciation by $40 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($50 million) in 2023 and 2024, respectively. b. Insurance of $8 million was paid in 2021 for 2022 coverage. c. A $4 million loss contingency was accrued in 2021, to be paid in 2023. 3. No temporary differences existed at the beginning of 2021. 4. The tax rate is 25%. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. 2. Assume the enacted federal income tax law specifies that the tax rate will…ou are working with an accounting firm. Sussie, who is representing Suss Co, needs advice about depreciating assets. She asks; what are depreciating assets? What are the different ways to calculate the declining value of depreciating assets? Furthermore, Suss Co has aggregated turnover of $ 2 billion. In December 2021, Suss Co purchased a machine for $4m, which was commenced immediately for an income-producing purpose. What tax does the Suss Co claim?HAT Ltd owns a number of its retail premises, which it revalues annually. This year several of its shops rose sharply in value due to inflated property prices in their locality. HAT does not revalue its factory premises, which are held in the statement of financial position at $2.7m. HAT ltd's Profit before tax was $7m and a statement of financial position total of $23m. State what type of auditor’s report should be issued and explain your choice. You should not reproduce the entire audit report. Only mention appropriate extracts which are relevant.
- You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: Pretax accounting income was $45 million and taxable income was $8 million for the year ended December 31, 2021. The difference was due to three items: Tax depreciation exceeds book depreciation by $30 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($40 million) in 2023 and 2024, respectively. Insurance of $12 million was paid in 2021 for 2022 coverage. A $5 million loss contingency was accrued in 2021, to be paid in 2023. No temporary differences existed at the beginning of 2021. The tax rate is 25%. Required:1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.2. Assume the enacted federal income tax law specifies that the tax rate will change from 25%…The Drillup Company has been in the business of oil exploration for the past 10 years. In 2021. $10,000 was spent drilling wells that were dry holes. According to the accounting standards this should be capitalized. However, Drillup decided to treat the $10,000 as a one time expense for the business because of its positive effects for tax purposes entered by the accountant. The accountant has considered the ethical issues involved in this transaction. Select one: True FalseAccounting Company A is preparing its financial statements as at 31 December 20X3. On 31 December 20X3, Company A acquired an asset for 900, which is expected to be consumed by the end of 20X4. No tax deduction can be obtained for the cost of the asset. The company’s intention is to use the asset and not to sell it. The sale of assets is taxed at 40%. Internal consumption is taxed at 30%. What is the amount of deferred tax liability relating to the acquired asset as at 31 December 20X3?
- Harris Corp. is a technology start-up currently in its second year of operations. The company didn’t purchase any assets this year but purchased the following assets in the prior year: Placed in Asset Service Basis Office equipment August 14 $ 10,200 Manufacturing equipment April 15 70,000 Computer system June 1 18,000 Total $ 98,200 Harris did not know depreciation was tax deductible until it hired an accountant this year and didn’t claim any depreciation deduction in its first year of operation. (Use MACRS Table 1 and Table 2.) Problem 10-55 Part b (Algo) b. What is the basis of the office equipment at the end of the second year? (Leave no answer blank. Enter zero if applicable.) Basis of Office Equipment:$_______?Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $510,000. Of this sum, $61,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the company will need to treat this cost as a tax- deductible current expense or as a capital investment. In the latter case, the company could depreciate the $61,000 straight-line over five years. How will the tax authority's decision affect the after-tax cost of the kiln? The tax rate is 25%, and the opportunity cost of capital is 6%. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Installation cost is expensed at the end of year 1 If installation cost is capitalized and depreciated over 5 years PV Tax shieldGo Green Company is an environmental consulting firm in its second year of operations. The company didn't purchase any assets this year, but it did purchase the following assets in the previous year: Asset Placed in service Cost Computers March 10 $25,000 Furniture March 10 $40,000 Equipment April 15 $50,000 Go Green Company did not know that depreciation was tax deductible until it hired an accounting firm this year to help with its financial statements and tax return. Assume that bonus depreciation was not in effect and Go Green does not want to elect Section 179 for any of the assets. (a) What is the maximum amount of depreciation deduction Go Green Company can deduct in its second year of operations? (Round answer to O decimal places, e.g. 125.) Deduction $
- Harris Corporation is a technology start-up in its second year of operations. The company didn’t purchase any assets this year but purchased the following assets in the prior year: Asset Placed in Service Basis Office equipment August 14 $ 10,400 Manufacturing equipment April 15 72,000 Computer system June 1 20,000 Total $ 102,400 Harris did not know depreciation was tax deductible until it hired an accountant this year and didn’t claim any depreciation deduction in its first year of operation. (Use MACRS Table 1 and Table 2.) Problem 10-55 Part a (Algo) a. What is the maximum amount of depreciation deduction Harris Corporation can deduct in its second year of operation? (Leave no answer blank. Enter zero if applicable.)During the current year, Newtech Corporation sold a segment of its business at a loss of $230,000. Until it was sold, the segment had a current period operating loss of $200,000. Also, the company had an extraordinary gain of $90,000 during the year as the result of an expropriation settlement received from a foreign government. The company has $800,000 income from continuing operations for the current year. Prepare the lower part of the income statement, beginning with the $800,000 income from continuing operations. Follow tax allocation procedures, assuming that all changes in income are subject to a 40 percent income tax rate. Disregard earnings per share disclosures. Income from Continuing Operations Discontinued Operations Loss from operations of discontinued segment $ (120,000) * Loss on disposal of discontinued segment Income before Extraodinary Item Extraordinary Item Gain on expropriation settlement Net Income (138,000) X S 480,000 X x 370,000 X 54,000 800,000 XMs. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $580,000. Of this sum, $68,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the company will need to treat this cost as a tax- deductible current expense or as a capital investment. In the latter case, the company could depreciate the $68,000 straight-line over five years. How will the tax authority's decision affect the after-tax cost of the kiln? The tax rate is 25%, and the opportunity cost of capital is 8%. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. > Answer is complete but not entirely correct. PV Tax shield 15,741✔ After-tax cost is smaller 13,575X After-tax cost is larger Installation cost is expensed at the end of year 1 If installation cost is capitalized and depreciated over 5 years $ $ 33