Th e following information pertains to Entiguan Sports for the 2006 year-end. Th e treatment of items for accounting and tax purposes is based on fi ctitious accounting andtax standards and is not specifi c to a particular jurisdiction. Calculate the tax base andcarrying amount for each item.1 . Donations : Entiguan Sports made donations of €100,000 in the current fi scal year.Th e donations were expensed for fi nancial reporting purposes, but are not tax deductible based on applicable tax legislation.2 . Interest received in advance : Entiguan Sports received in advance interest of €300,000.Th e interest is taxed because tax authorities recognize the interest to accrue to thecompany (part of taxable income) on the date of receipt.3 . Rent received in advance : Entiguan recognized €10 million for rent received in advance from a lessee for an unused warehouse building. Rent received in advance isdeferred for accounting purposes but taxed on a cash basis.4 . Loan : Entiguan Sports secured a long-term loan for €550,000 in the current fi scalyear. Interest is charged at 13.5 percent per annum and is payable at the end of eachfi scal year.
Th e following information pertains to Entiguan Sports for the 2006 year-end. Th e treatment of items for accounting and tax purposes is based on fi ctitious accounting and
tax standards and is not specifi c to a particular jurisdiction. Calculate the tax base and
carrying amount for each item.
1 . Donations : Entiguan Sports made donations of €100,000 in the current fi scal year.
Th e donations were expensed for fi nancial reporting purposes, but are not tax deductible based on applicable tax legislation.
2 . Interest received in advance : Entiguan Sports received in advance interest of €300,000.
Th e interest is taxed because tax authorities recognize the interest to accrue to the
company (part of taxable income) on the date of receipt.
3 . Rent received in advance : Entiguan recognized €10 million for rent received in advance from a lessee for an unused warehouse building. Rent received in advance is
deferred for accounting purposes but taxed on a cash basis.
4 . Loan : Entiguan Sports secured a long-term loan for €550,000 in the current fi scal
year. Interest is charged at 13.5 percent per annum and is payable at the end of each
fi scal year.
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