The LeMond Corporation just purchased a new production line. Assume that the firmplanned to depreciate the equipment over 5 years on a straight-line basis, butCongress then passed a provision that requires the company to depreciate theequipment on a straight-line basis over 7 years. Other things held constant, which ofthe following will occur as a result of this Congressional action? Assume that thecompany uses the same depreciation method for tax and stockholder reportingpurposes.LeMond's taxable income will be lower.LeMond's cash position will decrease.LeMond's tax liability for the year will be lower.LeMond's reported net income after taxes for the year will be lower.LeMond's net fixed assets as shown on the balance sheet will be lower at the end ofthe year.

In straight line depreciation there is uniform annual depreciation of equipment over the life of…

Answered: The LeMond Corporation just purchased a…

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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ABC Corp calculated that it had sustained a deferred tax asset of $450,000 in respect of a tax loss and deductible temporary difference of $2.25 million but it had not recognised any such asset in the balance sheet. During the year, a business was injected to the company by themajor shareholder and the company began to derive taxable profit to offset with the loss brought forward. Required:1. Discuss the implication of the current development on ABC’s deferred tax asset.2. Suggest journal entries to effect the implication in (1).3. If the tax rate is increased to 30%, discuss and suggest journal entries.
During the current year, Omega Products Corporation incurred the following expenditures whichshould be recorded either as operating expenses or as intangible assets:a. Expenditures were made for the training of new employees. The average employee remainswith the company for five years, but is trained for a new position every two years.b. Omega purchased a controlling interest in a wallpaper company. The expenditure resulted inrecording a significant amount of goodwill. Omega expects to earn above-average returns onthis investment indefinitely.c. Omega incurred large amounts of research and development costs in developing a superiorproduct. The company expects that it will be patented and that sales of the resulting productswill contribute to revenue for at least 40 years. The legal life of the patent, however, will be only20 years.d. Omega made an expenditure to acquire the patent on a whatsa. The patent had a remaining legallife of 10 years, but Omega expects to produce and sell the…
Sharp Corporation purchased qualified business property in 2023 and placed it in service immediately. The equipment cost $450,000. Sharp does not claim section 179 deduction, which provision would allow Sherp Corporation to deduct 80% of the cost of the equitment on the 2023 tax return?
Hagrid Inc. is subject to an acquisition of control (AOC) on January 1, 2023. The company has a business loss of $65,000 in its 2022 taxation year prior to the AOC, which cannot be carried back. On December 31, 2022, the company had two capital properties, land with an ACB of $150,000 and FMV of $65,000; and a depreciable property with a capital cost and ACB of $100,000, a UCC of $75,000 and a FMV of $200,000. Assuming Hagrid will continue in business and will return to profitability in 2023, what write downs and elections are available to Hagrid Inc. in order to optimize the amount of 2022 non-capital losses carried forward to the 2023 taxation year? Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A capital gain on the depreciable property would be realized equal to $50,000 and there would be recapture of $25,000. Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A…
On July 1 of year 1, Riverside Corporation (RC), a calendar-year taxpayer, acquired the assets of another business in a taxable acquisition. When the purchase price was allocated to the assets purchased, RC determined it had purchased $1,620,000 of goodwill for both book and tax purposes. At the end of year 1, RC determined that the goodwill had not been impaired during the year. In year 2, however, RC concluded that $635,000 of the goodwill had been impaired and wrote down the goodwill by $635,000 for book purposes. Required: a. What book-tax difference associated with its goodwill should RC report in year 1? Is it favorable or unfavorable? Is it permanent or temporary? b. What book-tax difference associated with its goodwill should RC report in year 2? Is it favorable or unfavorable? Is it permanent or temporary? Complete this question by entering your answers in the tabs below. Required A Required B What book-tax difference associated with its goodwill should RC report in year 1? Is…
On July 1 of year 1, Riverside Corporation (RC), a calendar-year taxpayer, acquired the assets of another business in a taxable acquisition. When the purchase price was allocated to the assets purchased, RC determined it had purchased $2,106,000 of goodwill for both book and tax purposes. At the end of year 1, RC determined that the goodwill had not been impaired during the year. In year 2, however, RC concluded that $460,000 of the goodwill had been impaired and wrote down the goodwill by $460,000 for book purposes. Required: a. What book-tax difference associated with its goodwill should RC report in year 1? Is it favorable or unfavorable? Is it permanent or temporary? b. What book-tax difference associated with its goodwill should RC report in year 2? Is it favorable or unfavorable? Is it permanent or temporary? Complete this question by entering your answers in the tabs below. Req A Req B
A corporation sold a piece of equipment during the tax year for $85,200. The accounting records show that its cost basis is $190,000 and the accumulated depreciation is $150,000. Does the company owe additional taxes due to this sale? no excel

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