Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
6th Edition
ISBN: 9780134486840
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 9.1EI
Western Bank & Trust purchased land and a building for the lump sum of $3,000,000. To get the maximum tax deduction, Western allocated 90% of the purchase price to the building and only 10% to the land. A more realistic allocation would have been 70% to the building and 30% to the land.
Requirements
1. Explain the tax advantage of allocating too much to the building and too little to the land.
2. Was Western’s allocation ethical? If so, state why. If not, why not? Identify who was harmed.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Dungan Corporation is evaluating a proposal to purchase a new drill press to replace a less efficient machine presently in use. The
cost of the new equipment at time 0, including delivery and Installation, is $205,000. If It is purchased, Dungan will incur costs of
$5,200 to remove the present equipment and revamp its facilities. This $5,200 is tax deductible at time 0.
Depreciation for tax purposes will be allowed as follows: year 1, $42,000; year 2, $72,000; and in each of years 3 through 5, $32,000
per year. The existing equipment has a book and tax value of $102,000 and a remaining useful life of 10 years. However, the existing
equipment can be sold for only $42,000 and is being depreciated for book and tax purposes using the straight-line method over its
actual life.
Management has provided you with the following comparative manufacturing cost data.
Annual capacity (units)
Annual costs:
Labor
a.
b.
Depreciation
Other (all cash)
Total annual costs
The existing equipment is expected…
Totem group is planning to purchase a new printing machine to replace a current machine. The cost of the new machine Konica Minolta 512i , including delivery and installation, is IDR 140,000,000. If it is purchased, Totem will incur costs of IDR 10,000,000 to remove the current printing machine and revamp its facilities and it is tax deductible at time 0. Depreciation for tax purposes will be as follows: year 1, IDR 28,000,000; year 2, IDR 49,000,000; and in each of years 3 through 5, IDR 21,000,000 per year. The existing printing machine has a book value of IDR 70,000 and a remaining useful life of 5 years. However, the existing equipment can be sold for only IDR 25,000,000 and is being depreciated using the straight-line method over its actual life.
Marketing team has provided comparative printing cost data as follow:
Current Machine New Machine
Machine Available per…
In county A, property is assessed at 35% of market value, with a tax rate of 37.6 mills.
In county B, property is assessed at 24% of market value, with a tax rate of 39.3 mills.
A company is trying to decide where to place a building with a fair market value of
$85,000. Which county would charge the lower property tax? Find the difference.
Which county would charge the lower property tax?
County A
County B
What is the annual savings?
(Round to the nearest cent.)
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Ch. 9 - Prob. 1QCCh. 9 - Prob. 2QCCh. 9 - Which method almost always produces the most...Ch. 9 - A Celty Airline jet costs 28,000,000 and is...Ch. 9 - A copy machine costs 45,000 when new and has...Ch. 9 - Suppose Print and Photo Center in the preceding...Ch. 9 - Prob. 7QCCh. 9 - Prob. 8QCCh. 9 - Liberty Corporation reported beginning and ending...Ch. 9 - A truck costs 50,000 when new and has accumulated...
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - What is the difference between a capital...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - How does a business decide which depreciation...Ch. 9 - Prob. 10RQCh. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - How is gain o r loss determined when disposing of...Ch. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - What does it mean if an exchange of plant assets...Ch. 9 - Prob. 9.1SECh. 9 - Prob. 9.2SECh. 9 - Prob. 9.3SECh. 9 - Prob. 9.4SECh. 9 - Prob. 9.5SECh. 9 - Prob. 9.6SECh. 9 - Prob. 9.7SECh. 9 - S9-8 Discarding an asset
On October 31, 2018,...Ch. 9 - Prob. 9.9SECh. 9 - Prob. 9.10SECh. 9 - Prob. 9.11SECh. 9 - Prob. 9.12SECh. 9 - Prob. 9.13SECh. 9 - Prob. 9.14SECh. 9 - S9A-15 Exchanging plant assets
Micron Precision,...Ch. 9 - S9A-16 Exchanging plant assets
White Corporation...Ch. 9 - Prob. 9.17ECh. 9 - E9-18 Making a lump-sum purchase of...Ch. 9 - Prob. 9.19ECh. 9 - E9-20 Computing depreciation—three methods
Crispy...Ch. 9 - E9-21 Changing an asset’s useful life and residual...Ch. 9 - E9-22 Recording partial-year depreciation and sale...Ch. 9 - Prob. 9.23ECh. 9 - Prob. 9.24ECh. 9 - Prob. 9.25ECh. 9 - Prob. 9.26ECh. 9 - Prob. 9.27ECh. 9 - Prob. 9.28ECh. 9 - Prob. 9.29ECh. 9 - Prob. 9.30APCh. 9 - P9-31A Determining asset cost, preparing...Ch. 9 - Prob. 9.32APCh. 9 - Prob. 9.33APCh. 9 - Prob. 9.34APCh. 9 - Prob. 9.35APCh. 9 - Prob. 9.36BPCh. 9 - Prob. 9.37BPCh. 9 - Prob. 9.38BPCh. 9 - Prob. 9.39BPCh. 9 - Prob. 9.40BPCh. 9 - Prob. 9.41BPCh. 9 - Prob. 43CPCh. 9 - Prob. 9.1TICh. 9 - Western Bank Trust purchased land and a building...Ch. 9 - Prob. 9.1FCCh. 9 - Prob. 9.1FSCCh. 9 - In 150 words or fewer, explain the different...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Need Help with this Questionarrow_forwardif a company is considering the purchase of a parcel of land that was acquired by the seller for $89,000 is offered for sale at 158,000 is assessed for tax purposes at 99,000 is considered by the purchaser as easily being worth 148,000 and is purchased for 145,000 the land should be recored in the purchaser books at (A. 99,000, B. 145,000, C. 146,500, D. 148,000, E. 158,000)arrow_forwardCalculate and allocate basis for the following problems. 1. A property is acquired for a purchase price of $230,000 cash plus acquisition costs of $20,000. The tax assessment for this property is as follows: Assessed Value Land Improvements Total assessments $40,000 160,000 $200,000 a. What is the acquisition basis for this property? b. What is the allocation for land? c. What is the allocation for improvements?arrow_forward
- 3) Consolidated Minerals (CM) owns the rights to extract minerals from beach sands on Fraser Island. CM has costs in three areas: A. Payment to a mining subcontractor who charges $80 per ton of beach sand mined and returned to the beach (after being processed on the mainland to extract three minerals: ilmenite, rutile, and zircon). B. Payment of a government mining and environmental tax of $50 per ton of beach sand mined. C. Payment to a barge operator. This operator charges $150,000 per month to transport each batch of beach sand-up to 100 tons per batch per day-to the mainland and then return to Fraser Island (that is, 0 to 100 tons per day = $150,000 per month; 101 to 200 tons per day = $300,000 per month, and so on). Each barge operates 25 days per month. The $150,000 monthly charge must be paid even if fewer than 100 tons are transported on any day and even if CM requires fewer than 25 days of barge transportation in that month. CM is currently mining 180 tons of beach sands per…arrow_forwardA VAT-registered company acquired one vehicle for land transport for the use of an official or employee valued at P2,400,000. Which of the following statements is correct?arrow_forwardTones Company purchased a warehouse in a downtown district where land values are rapidly increasing. Gerald Carter, the controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Noting that depreciation can be taken only on the building, Carter favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she says, net income is negatively impacted by additional depreciation and will cause the company's stock price to go down. Instructions: Answer the following questions: (a) What stakeholder interests are in conflict? (b) What ethical issues does Carter face? (c) How should these costs be allocated?arrow_forward
- A comparable property recently sold for $65,000. the only difference between the comparable property and the subject property is that the comparable property has a screened, enclosed pool valued at $10, 000. because the subject property is viewed as inferior to the comparable property that has the pool there should be a A. PLUS 10K ADJUSTMENT TO THE COMPARABLE PROPERTY B MINUS 10K ADJUSTMENT TO THE COMPARABLE PROPERTY C PLUS 10K ADJUSTMENT TO THE SUBJECT PROPERTY D MINUS 10K ADJUSTMENT TO THE SUBJECT PROPERTYarrow_forwardThe town in which their store is located town has a total commercial property assessment of $986,589,765. It initially estimated that $69750500 must be raised through commercial taxation to meet expenditure What tax rate per $1000 must be set to raise the $69750500 ii The store is assessed at $65950. What are the property taxes for this property. If an additional $4,000,000 must be raised, what is the increase in the tax rate required to meet the iii additional expenses? 3 4 45 iv How much additional property taxes will the owners of $65950 store property have to pay? 46 47arrow_forwardI know the answer but tell me why we don’t include the 6,000 in the cost of the land, because i answered it wrong and take your time don’t reject the question, thank you.arrow_forward
- Firm M exchanged an old asset with a $16,600 tax basis and a $39,000 FMV for a new asset worth $27,500 and $11,500 cash. Required: a. If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. b. How would your answers change if the new asset were worth only $16,000, and Firm M received $23,000 cash in the exchange? Complete this question by entering your answers in the tabs below. Required A Required B If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. Amount Realized gain Recognized gain Tax basisarrow_forwardVaughn County owned an idle parcel of real estate consisting of land and a factory building. Vaughn gave title to this realty to Cullumber Company as an incentive for Cullumber to establish manufacturing operations in the County. Cullumber paid nothing for this realty, which had a fair value of $200000 at the date of the grant. Cullumber should record this nonmonetary transaction as a credit to Contribution Revenue for $200000. credit to Comprehensive Income for $200000. credit to Donated Capital for $200000. memo entry only.arrow_forwardGet Answer with Correct Optionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY