EBK CONCEPTS IN FEDERAL TAXATION 2019
26th Edition
ISBN: 9781337671774
Author: Murphy
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 12, Problem 35P
a.
To determine
Compute the minimum gain that Person A's should recognize on the damage by hurricane.
b.
To determine
Write a letter to Person A describing the way in which the involuntary conversion results would be accounted for and state the reason for advising to take those measures.
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- Provide answer general accountingarrow_forwardIf an oil rig was built in the sea, the cost to be capitalised is likely to include the cost of constructing the asset and the present value of the cost of dismantling it. If the asset cost $10 million to construct, and would cost $4 million to remove in 20 years, then the present value of this dismantling cost must be calculated. If interest rates were 5%, the present value of the dismantling costs are calculated as follows: $4 million x 1/1.0520 = $1,507,558 The total to be capitalised would be $10 million + $1,507,558 = $11,507,558. This would be depreciated over 20 years, so 11,507,558 x 1/20 = $575,378 per year. Each year, the liability would be increased by the interest rate of 5%. In year 1 this would mean the liability increases by $75,378 (making the year end liability $1,582,936). This increase is taken to the finance costs in the statement of profit or loss.arrow_forwardGeneral Accounting Question please answerarrow_forward
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