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The following information relates to Machine Productive at 31 December 2020:
R
Historic Carrying amount 400 000
Fair value less cost to sell 340 000
Value in Use 320 000
Tax Base 300 000
Remaining useful life 4 years
One year later the fair value less cost to sell was R320 000 and the value in use was R380 000. Machine Productive is
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- Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the assets book value. What amount will be recorded as depreciation expense each year, and what will the book value be at the end of each year after depreciation is recorded?Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense for 2019 if the units-of-production method were used ( Note: Round your answer to the nearest dollar)? a. $179,400 b. $184,000 c. $218,400 d. $224,000
- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.PPE cost €900,000 and has an estimated useful life of 3 years to an estimated salvage value of zero. The company uses straight-line depreciation but the tax authority gives allowances in the following accelerated form: 2017 is €500,000 2018 is €300,000 2019 is €100,000 And company EBITDA was: 2017 €900,000 2018 €950,000 2019 €1,020,000 And the statutory tax rate is 40% and has an effective tax rate of 36%. Calculate the firms’ tax payable, tax expense, deferred tax liability recorded in the balance sheet each year end and tax base for the asset for each year.
- ABC Company has an equipment acquired on January 1, 2018 at a cost of P2,200,000 with estimated residual value of P200,000 and 20 years estimated useful life. On December 31, 2021, the replacement cost of the equipment is P2,400,000. Two years after, the depreciated replacement cost has declined to 1,470,000. Round off percentage to whole number and gross-up value to the nearest peso if you are required to gross up. On December 31, 2024, the equipment’s carrying value isA company buys a £300 computer in Year 1 and capitalizes the expenditure. Th e computer has a useful life of three years and an expected salvage value of £0, so the annualdepreciation expense using the straight-line method is £100 per year. Compared to expensing the entire £300 immediately, the company’s pretax profit in Year1 is £200 greater.1. Assume that the company continues to buy an identical computer each year at thesame price. If the company uses the same accounting treatment for each of the computers, when does the profit-enhancing eff ect of capitalizing versus expensing end?2. If the company buys another identical computer in Year 4, using the same accounting treatment as the prior years, what is the eff ect on Year 4 profits of capitalizingversus expensing these expenditures?On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2020, the book value of the equipment was $30 million and its tax basis was $20 million. At December 31, 2021, the book value of the equipment was $28 million and its tax basis was $12 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $50 million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen's 2021 net income?
- On January 1, 2022, Romania Company purchased a specialized factory equipment for cash at a purchase price of P700,000. The company incurred P20,000 freight cost and handling costs of P10,000. The company expects that it will incur dismantling cost amounting to P80,000 at the end of the equipment’s 5-year useful life. The prevailing market interest rate during the transaction date was 6%. The present value factor of P1 at 6% for 5 periods is at 0.747 The present value factor of P1 ordinary annuity for 5 periods is at 4.212 1) How much is the initial cost of the equipment? A. 730,000 B. 810,000 C. 1,066,960 D. 789,760 2) Assuming the company is using the straight line method, how much is the total expenses for the year ended December 31, 2022? A. 171,952 B. 157,952 C. 161,538 D. 175,538EMSN Corp. purchased PPE on January 1, 2020 for $7,221,000. The production estimates the asset will be used for 5 years, after which it can be sold for $578,000 based on these estimates, what is the depreciation expense in 2021 on this asset if the ompann-of-the-year's-digits method for calculating depreciation? 2,214,333 1,771,467 $1,328,600 There is not enough information to answer this question. On July 1, 2020, Bodhi purchased equipment for $4,295,000. The salvage value of the equipment is estimated to be $515,000 and the management team believes that the equipment can be used for 5 years. Assuming the company uses the straight line method and follows FASB's preferences for recording partial year depreciation, what should the company record as depreciation expense in 2020? 378,000 $ 756,000 $3,539,000 $3,917,000 Which of the following would be considered a capital expenditure? (A 22) O Making a payment on accounts payable O Paying accumulated income taxes O Paying shipping…ABC Ltd acquired a machine on 1 Jan 2013 at a cost of 300,000. The useful life was set at 4 years, nil RV. Tax authorities allow wear & tear over 3 years. Tax rate is 30%.Company year end is Dec. Profit before tax is 100,000 per annum Calculate the current tax for the 4 yrs (13 –16) Same information as above, except, ABC Ltd decides to sell the machine on 30 December 2014. For an amount of: a)170,000 and b) 120,000 Calculate the current tax payable for Dec 2014.
