69. Circuit Corporation (CC) is a calendar-year, accrual-method taxpayer. CC manu-factures and sells electronic circuitry. On November 15 of this year, CC enters intoa contract with Equip Corp (EC) that provides CC with exclusive use of EC's spe-cialized manufacturing equipment for the five-year period beginning on January 1of next year. Pursuant to the contract, CC pays EC $100,000 on December 30 ofthis year. How much of this expenditure is CC allowed to deduct this year andnext year?LO 1-4

A cash basis taxpayer records their revenue as soon as it is actually received and their outgoing…

Answered: 69. Circuit Corporation (CC) is a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the beginning of the current year, Maple Corporation (a calendar year taxpayer) has accumulated E & P of $140,000. During the year, Maple incurs a $120,000 loss from operations that accrues ratably. On July 1, Maple distributes $85,000 in cash to Asya, its sole shareholder. Assume Asya has sufficient basis for the distribution. How is Asya taxed on the distribution? Of the $85,000 distribution, ($fill in the blank 1) is taxed as a dividend and ($fill in the blank 2) represents a return of capital.
Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its product sales. For tax purposes, the expense is deducted when the warranty work is completed. At December 31, 2021, Lance has a warranty liability of $2 million and taxable income of $80 million. At December 31, 2020, Lance reported a deferred tax asset of $461,000 related to this difference in reporting warranties, its only temporary difference. The enacted tax rate is 25% each year. Required:Prepare the appropriate journal entry to record Lance’s income tax provision for 2021.
Corporation Compute the amount of charitable contribution deduction for the current year for the following taxpayers. Ignore any percentage limitations. a. Pritizo Corporation owns inventory with a basis of $30,000 and a fair market value of $24,000. A charitable contribution of the Inventory results in a deduction of $S b. During the current year, Lasso Corporation donates a capital asset to Midlands College. Lasso acquired the asset three years ago for $18,000, and the fair market value on the date of the contribution is $32,000. The corporation's charitable contribution deduction is c. Nate Corporation donates a sculpture worth $130,000 to a local museum (a qualified organization), which exhibits the sculpture. Nate had acquired the sculpture in 2005 for $55,000. Nate is allowed to deduct $ Previous Subm Emtal thsfreuctar
. 1, 2, 3, and 4) i Multiple Choice O Ajax Computer Company is an accrual-method calendar-year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $2.10 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $1,600,000 for a one-time advertising blitz during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deduct this year? $3.70 million only if the professional golf tournament is played before April 15 $3.70 million $1,600,000 No deduction can be claimed this year Saved $2.10 million Save
Blackburn Corporation is a calendar year taxpayer. Every year on September 1, Blackburn enters into a contract with Smith Company for Smith to provide cleanup and winterization services for its grounds and buildings. The amount paid on September 1 when the contract is signed is $7,500 and the contract runs from December of the same year through March of the following year. When may Blackburn deduct the amount paid on September 1, 2020?
Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Troy receives a salary of $60,000 per year. He also receives a bonus equal to 10% of all collections from clients he serviced during the year (which he receives in January of the following year). Determine the tax consequences of the following events to the corporation and to Troy: a. On December 31, 2023, Troy was visiting a customer. The customer gave Troy a $10,000 check payable to the corporation for appraisal services Troy performed during 2023. Troy did not deliver the check to the corporation until January 2024. The corporation recognizes the income in: Troy recognizes the bonus related to this collection in: Question Content Area b. Assume Eagle Corporation is an accrual basis taxpayer. On December 31, 2023, Troy was visiting a customer. The customer gave Troy a $10,000 check payable to the corporation for appraisal services Troy performed during 2023. Troy deposited the…
At December 31, 2025, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 20%. Compute the amount Suffolk should report as a deferred tax asset at December 31, 2025.
The taxpayer is a resident citizen and the taxable period is 2021. Compute for the GROSS income provided the following: Gross sales amounting to 2,500,000; sales discounts amounting to 130,000; senior citizems discount (20%) granted amounting to 160,000; cost of sales amounting to 1,000,000; operating expenses (including repairs) amounting to 500,000 and repairs for PWD facilities amounting to 150,000. 870,000 1,030,000 1,210,000 1,370,000
Ajax Computer Company is an accrual-method calendar-year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $500,000 for a one-time advertising blitz during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deduct this year? Multiple Choice $1 million $500,000 $1.5 million $1.5 million only if the professional golf tournament is played before April 15 No deduction can be claimed this year
Xenon, LLC is a partnership, for tax purposes, with a C corporation member. Xenon has three year average annual gross receipts of $24 million from the retail sale of merchandise. Xenon may use the cash method for all purposes of tax reporting, without limitation. Select one: True False Digital Video Recorders is an accrual method taxpayer that uses the calendar year as its tax year. Digital offers customers a refund if they are not satisfied with their products. During X1, 100 customers request a refund of the $500 purchase price. Digital refunds $30,000 on or before September 15, X2. It refunds the remaining $20,000 in October X2. If Digital adopts the recurring item exception with respect to the refunds, economic performance is treated as having occurred in X1 for the $50,000 refunded in X1. Select one: True False No hand written and fast answer with explanation
Lorissa owes Waterbury State Bank $200,000. During the current year, she isunable to make the required payments on the loan and negotiates the followingterms to extinguish the debt. Lorissa transfers to Waterbury ownership ofinvestment property with a value of $90,000 and a basis of $55,000, and commonstock with a value of $50,000 and a basis of $70,000. Lorissa also pays Waterbury$5,000 cash, and Waterbury forgives the remaining amount of debt. Before theagreement, Lorissa's assets are $290,000, and her liabilities are $440,000.Determine how much gross income Lorissa has from the extinguishment of the debt.
For federal tax purposes, how long should a sole proprietor keep records on a machine used 100% for business? Until three years after the due date of the return for the year: When the machine is placed into service. When the machine is purchased. That ends four years after the machine was first placed into service. In which the machine is disposed of in a taxable disposition.

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