Earthworks is an excavation company which started its operations in the year 2008. The board of governors set the Minimum Acceptable Rate of Return for the company at 12% after-tax. Due to the nature of their work, Earthworks own equipment which are in CCA class 8 (CCA rate = 20%). For the 5 years following its inception, Earthworks purchased 4 Machines, two of which they ended up selling. The record of their transactions is as summarized below: Dollar Value of Tax Year Transaction transaction 2008 Purchase of Machine A $75,000 2009 Purchase of Machine B $100,000
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- During the last five months of the year, Dwana opens a new Internet telecommunications business called Dwan-Com. Dwan-Com bills 50,000 of revenues, but receives only 40,000 cash. Dwan-Com incurs 3,000 of supply expenses, and 41,000 of labor costs. Dwan-Com pays for 2,200 of the supplies and 38,000 of the labor costs in the current year. a. What is Dwan-Coms taxable income if it elects the cash method of accounting? b. What is Dwan-Coms taxable income if it elects the accrual method of accounting? c. What method of accounting do you recommend that Dwan-Com elect?Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. The income tax rate is 25% for all years. A five-year casualty insurance policy was purchased at the beginning of 2019 for $31,000. The full amount was debited to insurance expense at the time. Effective January 1, 2021, the company changed the salvage value used in calculating depreciation for its office building. The building cost $568,000 on December 29, 2010, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000. On December 31, 2020,…Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. A five-year casualty insurance policy was purchased at the beginning of 2016 for $40,000. The full amount was debited to insurance expense at the time. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $650,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. On December 31, 2017,…
- Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. A five-year casualty insurance policy was purchased at the beginning of 2016 for $33,500. The full amount was debited to insurance expense at the time. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $598,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. On December 31, 2017,…Delta Electric Company expects to have an annual taxable income of $500,000 from its residential accounts over the next two years. The company is also bidding on a two-year wiring service job for a large apartment complex. This commercial service requires the purchase of a new truck equipped with wire-pulling tools at a cost of $50,000. The equipment falls into the MACRS five-year class and will be retained for future use (instead of being sold) after two years, indicating no gain or loss on this property. The project will bring in additional annual revenue of $200,000, but it is expected to incur additional annual operating costs of $100,000. Compute the marginal tax rates applicable to the project's operating profits for the next two years.Delta Electric Company expects to have an annual taxable income of $500,000 from its residential accounts over the next two years. The company is also bidding on a two-year wiring service job for a large apartment complex. This commercial service requires the purchase of a new truck equipped with wirepulling tools at a cost of $50,000. The equipment falls into the MACRS five-year class and will be retained for future use (instead of being sold) after two years, indicating no gain or loss on this property. The project will bring in additional annual revenue of $200,000, but it is expected to incur additional annual operating costs of $100,000. Compute the marginal tax rates applicable to the project'soperating profits for the next two years.
- Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2002 by two talented engineers with little business training. In 2016, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2016 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2014 for $35,000. The full amount was debited to insurance expense at the time. b. On December 31, 2015, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system. c. The company changed inventory cost methods to FIFO from LIFO at the end of 2016 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2015. d. At the end of 2015, the company…Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician whoinstalls wiring in new homes. Because the company’s financial statements are prepared only for taxpurposes, Jon uses the direct write-off method. During 2015, its first year of operations, TrevorsonElectronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectible. In 2016,Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. Tomake matters worse, Jon sold only $5,000 of services during the year.Required:1. Prepare journal entries to record the transactions in 2015 and 2016.2. Using only the information provided (ignore other operating expenses), prepare comparativeincome statements for 2015 and 2016. Was 2015 really as profitable as indicated by its incomestatement? Was 2016 quite as bad as indicated by its income statement? What should Jon…On January 1, 2021, Famous Inc. acquired a piece of equipment for a list price of $340,000. It paid $50,000 cash and issued a 3-year note payable for the remainder. The note requires annual payments of a 3% interest every December 31. Famous Ic. also paid $16,000 to install the equipment, and $6,000 to test it. At the end of the testing, the company was able to obtain an output of good quality and sold it for $2,300. Famous Inc.'s incremental borrowing rate is 5%. The equipment's useful life is $80,000 at the end of its 10-year useful life. It was ready for use on March 31, 2021, but the company started using it on April 30th, 2021. Famous is a public company and uses the straight-line method to depreciate its equipment. Required- 1- Prepare the journal entry to record the acquisition of the equipment. 2- Prepare the required adjusting entries on December 31, 2021.
- In 2017, Kerry Corp's financial statement showed accrued losses on disposal of unused plant facilities of $3,600,000. The facilities were sold in December 2018 and a $3,600,000 loss was recognized for tax purposes then. Also in 2018, Kerry Corp's paid $150,000 for a two-year life insurance policy for their CEO Kerry, and the company was the beneficiary. Assuming that the enacted tax rate is 35% in both 2017 and 2018. Show the steps for the amount reported on December 31, 2017 as net deferred income taxes on the balance sheetEntity A is a local construction company, which provides construction services to different types of customers. On 16 December 2017, Entity A ordered a concrete plant from Entity B. The listed price of the plant is $680,000 for general customers. Entity B offers a 15% trade discount to Entity A because it is one of its loyal customers. According to the local environmental protection regulation, Entity A is required to remove the concrete plant at the end of the reporting period of 2022. The removal cost of $5,100 and the plant residual value of $4,013 was estimated at the inception of the contract respectively. The plant was delivered to Entity A on 1 January 2018. According to the contract, Entity B provides a 2-month credit period to Entity A. Finally, Entity A fully settled the outstanding amount on 1 February 2018. Installation and testing services are required to make the plant ready for use. On 1 January 2018, Entity C, the installation and testing service provider…Bach Co., a VAT-registered business, acquired a piece of equipment for P224,000 on account. The purchase price is inclusive of 12% VAT. A P4,480 prompt payment discount is available on purchase, but Bach Co. opted not to take it. Bach Co. also incurred P20,000 cost of training the personnel who will be operating the equipment. Two months after the equipment was installed, Bach Co. decided to redeploy the equipment to another location. Bach Co. incurred P30,000 in the relocation and reinstallation. The cost of the equipment is a. 245,520. b. 230,000. c. 204,480. d. 195,520.