Acc 423 Week 4 Wileyplus Assignment - Exercises

10. Gains/Losses are "generally" recorded at the same amount for both Capital Accounts and Tax Basis.

1. Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement

The net income was negative from 1989 to 1991. The net income is negative due to the depreciation costs. Operating

Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

The sum of the NPVs of future cash flows (cost savings) with tax savings from depreciation considered:

| D.  When the total is greater than the designated percentage of your adjusted gross income.

Use Tax: prevents avoidance of sales tax (same rate as sales tax- use or consumption of personal property)

Access the "Litigation" section of the SEC's website at www.sec.gov/litigation.shtml. Click on "Accounting and Auditing Enforcement Releases." Click on "AAER-3234" filed January 20, 2011. Read the release and the related SEC Complaint. Summarize the release and complaint in 2-3 pages (12-point, double spaced).

A deferred tax liability is recognized for temporary differences that will result in taxable amounts in future years. In Packer, Inc’s case, depreciation has been recognized as deferred tax liabilities. Packer uses straight-line depreciation, for tax purposes, the cost of the depreciable recourses may have been deducted faster than that for financial reporting purposes.

Definition: A capital loss that cannot be realized in a given tax year due to passive activity limitations. These losses are therefore "suspended" until they can be netted against passive income in a future tax year. Suspended losses are incurred as a result of passive activities, and can only be carried forward.

Chapter 7, Exercise #8. Below are sentences that might be spoken between two friends chatting informally. For each, state what the nonabbreviated full sentence in SAE would be. In addition, state in your own words (of formally if you wish) the rule or rules that derived the informal sentences from the formal one. a. Where’ve ya been today?

deduction in its draft tax return, resulting in a $40 reduction to taxes payable. There is uncertainty over

Another material difference is deferred income tax assets that went from $483,000 to $19,094,000. Totaling a significant difference of $18,611,000.

Net book value at end of year 1 is $8,793. Less what you received on the sale $7,500. Gives you a disposal loss of $1,293 using the straight-line method of depreciation. You then add the disposal loss from the previous years depreciation $1,880, which results in a total income statement impact of $3,173.