a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF had deducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000. b. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. It also recognized a $20,000 gain on equipment. it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $30,000. DEF had deducted $15,000 of tax depreciation on the equipment. Complete this question by entering your answers in the tabs below. Required A Required B In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. It also recognized a $20,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $30,000. DEF had deducted $15,000 of tax depreciation on the equipment. I Year 1 Year 2 Book-taxi Difference Favorable or Unfavorable Temporary or Permanent < Required A Required >

a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF had deducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000. b. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. It also recognized a $20,000 gain on equipment. it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $30,000. DEF had deducted $15,000 of tax depreciation on the equipment. Complete this question by entering your answers in the tabs below. Required A Required B In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. It also recognized a $20,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $30,000. DEF had deducted $15,000 of tax depreciation on the equipment. I Year 1 Year 2 Book-taxi Difference Favorable or Unfavorable Temporary or Permanent < Required A Required >

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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On November 10 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,200,000; $300,000 was allocated to the basis of the land and the remaining $900,000 was allocated to the basis of the building. a) Assume the building was purchased and placed in service on March 3 instead of November 10. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? b) Assume the building is residential property. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?c) What would be the depreciation for 2022, 2023, and 2024 if the property were nonresidential property purchased and placed in service November 10, 2005 (assume the same original basis)?
During the current year, Hill Corporation sold equipment for $600,000 (adjusted basis of $360,000). The equipment was purchased a few years ago fo $760,000 and $400,000in MACRS deductions have been claimed. ADS depreciation would have been $300,000. As a result of the sale, the adjustment to taxable income needed to determine current E & P is A) No agjustment is required B) Subtract $100,000 C) Add $100,000 D) Add $80,000 E) None of the above
5. On January 2, 20x1, Ross Co. purchased a machine for P70,000. This machine has a 5-year useful life, a residual value of P10,000, and is depreciated using the straight-line method for financial statement purposes. For tax-purposes, depreciation expense was P25,000 for 20x1 and P20,000 for 20x2. Ross’ 20x2 income, before income taxes and depreciation expense, was P100,000 and its tax rate was 30%. If Ross had made no estimated tax payments during 20x2, what amount of current income tax liability would Ross report in its December 31, 20x2 balance sheet?
On January 1, year 1, Wardags Co. purchased a P6,000,000 machine, with a five-year useful life and no salvage value. The machine was depreciated by an accelerated method for book and tax purposes. The machine’s carrying amount was P2,400,000 on December 31, year 2. On January 1, year 3, Wardags changed to the straight-line method for financial reporting purposes. Wardags can justify the change. Wardags’s income tax rate is 30%. In its year 3 income statement, 1. What amount should Warren report as the cumulative effect of this change? 2. On January 1, year 3, what amount should Warren report as deferred income tax liability as a result of the change?
5. Assume the same facts as in (4) above except the destroyed property was a personal residence and that the fire was declared a Presidential disaster. Now calculate the amount of the deductible loss assuming the taxpayer's AGI was $200,000. 6. Briefly recap the current rules applicable to net operating losses. How much of the NOL is currently deductible and what happens to unused losses.
17.On December 31, 20x1, the building of Borong Co. with a historical cost of #320,000,000, accumulated depreciation of #160,000,000, and an estimated useful life of 20 years was determined to have a fair value of $200,000,000. Borong Co. is subject to an income tax rate of 30%. Under the elimination method, the entry to record the revaluation includes a. a debit to accumulated depreciation for $160,000,000. b. a debit to accumulated depreciation for $40,000,000. c. a debit to building for $120,000,000. d. a credit to building for $160,000,000.
11. Subject :- Accounting Sumner sold equipment that it uses in its business for $30,800. Sumner bought the equipment a few years ago for $79,600 and has claimed $39,800 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss? Multiple Choice $9,000 §1231 loss. $9,000 §1245 loss. $48,800 ordinary loss. $9,000 capital loss. None of the choices are correct.
A company purchased a drill press costing $230,000 in year 0. The drill press, classified as seven-year recovery property, has been depreciated by the MACRS method. If it is sold at the end of three years for (1) $150,000 or (2) $100,000, compute the gains (losses) for each situation. Assume that both capital gains and ordinary income are taxed at 34%.
North Ltd. purchased a building in 20X5 for $1,450,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $470,000. A full year of depreciation was charged in 20X5. In 20X8, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 20%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $ 137,650 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense Cumulative effect
The sole proprietorship business of Individual M purchased a machinery amounting to $30,000. The machinery is expected to be useful for a period of 4 years and have a residual value of $5,000. Individual M uses the double-declining method in depreciating their fixed assets. How much would be the depreciation expense for year 3?