nstructionsQuestion 16Which of the following statements is CORRECT?O Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.O Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.Corporations must use the same depreciation method for both stockholder reporting and tax purposes.O Using bonus depreciation rather than straight line depreciation normally has the effect of receiving depreciation cash flows immediately and thusincreasing a project's forecasted NPV.O Using bonus depreciation rather than straight line depreciation normally has the effect of delaying the receipt of depreciation cash flows and thusreducing a project's forecasted NPV.« PreviousNextNot savedSubmit Quiz80000000escDDF1F2F3F4F 5F6F7FO%23$4%&2345678QWАSDGKBMI

Depreciation is the process of tying the expense of utilizing a tangible item to the benefit earned…

Answered: Question 16 Which of the following…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question No. 17
Chapter 7 Homework Help Save & Exit Submit Saved TGW, a calendar year corporation, reported $4,016,000 net income before tax on its financial statements prepared in accordance with GAAP. The corporation's records reveal the following information: • TGW's depreciation expense per books was $457,000, and its MACRS depreciation deduction was $382,400. • TGW capitalized $687,000 indirect expenses to manufactured inventory for book purposes and $820,000 indirect expenses to manufactured inventory for tax purposes. • TGW's cost of manufactured goods sold was $2,566,000 for book purposes and $2,656,000 for tax purposes. • Four years ago, TGW capitalized $2,304,000 goodwill when it purchased a competitor's business. This year, TGW's auditors required the corporation to write the goodwill down to $1,545,000 and record a $759,000 goodwill impairment expense. 2 points eBook Required: Compute TGW's taxable income. (Do not round intermediate calculations. Amounts to be deducted should be indicated…
8 D es Required information [The following information applies to the questions displayed below.] Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Cash Building Land Total FMV Adjusted Tax Basis $ 200,000 $ 200,000 50,000 150,000 10,000 200,000 $ 400,000 $ 410,000 Appreciation (Depreciation) Gain or loss recognized 40,000 (50,000) $ (10,000) Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $100,000. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized…
Exercise 16-5 (Algo) Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation in the year of purchase; financial statement effects [LO16-2] Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 2027 Pretax accounting income $ 370 $ 390 Depreciation on the income statement 20 20 $ 405 20 Depreciation on the tax return (80) (0) (0) $ 440 20 (8) $ 310 $ 410 $ 425 $ 460 Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tex difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account.…
Problem 1: Use the facts below to answer Problem 1 Questions 1-3 Evergreen Corporation, a calendar year, accrual basis taxpayer, requires a new piece of equipment for use in its manufacturing business. The company would like to determine whether it would be cost beneficial to invest in the equipment and has asked you to help with some of the calculations. The equipment will cost $100,000 and qualifies as a 3 year asset under the MACRS classification. Evergreen will purchase the equipment on January 1, 2019, use the equipment for 3 years, and sell it in October of 2021. Evergreen estimates that it could sell the equipment for $15,000 in 2021. Assume that bonus depreciation and the Sec. 179 expensing option are not available. Problem 1 Question 1: Calculate the total depreciation deductions Evergreen will take on the equipment for 2019, 2020, and 2021 assuming Evergreen sells the equipment in 2021. a. $68,520 b. $85,185 c. $90,739 d. $92,590
Problem 3-16 (Algorithmic) (LO. 1, 4) Prance, Inc., earned pretax book net income of $1,677,000 in 2020. Prance acquired a depreciable asset in 2020, and first-year tax depreciation exceeded book depreciation by $167,700. In 2021, Prance reports $1,173,900 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $41,925. Prance reports no other temporary or permanent book-tax differences. Assume the pertinent U.S. Federal corporate income tax rate is 21% and Prance earned an after-tax rate of return on capital of 8%. Enter below the 2021 Prance's deferred tax expense and any deferred tax asset or liability. If an amount is zero, enter "0". If required, round your answer to nearest whole value. Deferred tax asset account balance Deferred tax liability account balance a. b. 0 Feedback -26,413 c. In net present value terms, what has been the value to Prance of accelerating $41,925 of 2021 book depreciation to 2020? The present value factor at 8% is…
8.15 Analyzing Disclosures Regarding Fixed Assets. Exhibit 8.21 presents selected financial statement data for three chemical companies: Monsanto Company, Olin Corporation, and NewMarket Corporation. (NewMarket was formed from a merger of Ethyl Corporation and Afton Chemical Corporation.) Exhibit 8.21 Three Chemical Companies' Selected Financial Statement Data on Depreciable Assets (amounts in millions) (Problem 8.15) New Market Corporation Monsanto Olin Company Q Q Depreciable assets at cost: Beginning of year End of year Accumulated depreciation: Beginning of year $752 $4,611 $1,796 777 4,604 1,826 584 2,331 1,301 End of year 611 2,517 1,348 Net income 33 267 55 Depreciation expense 27 328 72 Deferred tax liability relating to depreciable assets: Beginning of year 13 267 83 End of year 9 256 96 Income tax rate 35% 35% 35% Depreciation method for financial reporting Straight-line Straight-line Straight-line Depreciation method for tax reporting Accelerated Accelerated Accelerated
Question 4 On July 1, 2022, Pepperpot Company made a lump sum purchase of an office building, including the land and some fixtures, for cash of $550,000. The tax assessments for the past year reflected the following: Land, $48,000; Building, $168,000; and Fixtures, $24,000. Pepperpot believes they will use the building for another 20 years at which time they expect to sell it of $45,000. The fixtures only have a five year life and Pepperpot expects they will have a residual value of $2,000 when they are sold. Pepperpot depreciates their real estate holdings on a straight line basis. All fixtures are depreciated using declining balance method. a. b. c. Prepare the journal entry to record the acquisition. Show your work. Prepare any year end adjustments required. Show how the assets will be presented on the December 31, 2022 financial statements.
Match the term with its definition. Additions Avoidable Interest Capitalization Period Commercial Substance Improvements Choose] [Choose ] Time Elapsed: Hide Time Attempt due: May 12 at 11:59pm 1 Minute. 22 Seconds The amount of interest on existing debt that would not have been incurred if the expenditures for the constructed asset had not occured. Correct Answer Used in the exchange of nonmonetary assets. Occurs when future cash flows change as a result of the transaction. Correct Answer A substitution for a better asset than the one currently being used. Correct Answer A transaction that maintains property.plant and equipment in operating condition. Required to be expensed as incurred. Correct Answer A transaction that will benefit several periods. Required to be handled as either an addition, improvement, or replacement Correct Answer The lenght of time whereby a company must add the cost of interest incurred to the asset being constructed. Correct Answer Used in determining the…
1. Excess of tax depreciation over book depreciation $ 208,600 2. Accrual, for book purposes, of estimated loss contingency frompending lawsuit that is expected to be settled in 2020. The losswill be deducted on the tax return when paid. ( 46,900 ) 3. Accrual method used for book purposes and installment methodused for tax purposes for an isolated installment sale of an investment. 224,500 $ 386,200 In analyzing the temporary differences, you find that $ 30,700 of the depreciation temporary difference will reverse in 2020, and $ 115,300 of the temporary difference due to the installment sale will reverse in 2020. The tax rate for all years is 20%.Indicate the manner in which deferred taxes should be presented on Sage Company’s December 31, 2019, balance sheet.
Depreciation as a Tax Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $123,300. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $46,900 per year for the next five years. The corporation is currently in the 30% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4

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