You are required to determine the amount to be included in Farmer A’s taxable income.
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Barter Transactions
Farmer A is a lucrative wine farmer in the Western Cape. To expand farming operations, A entered into an agreement with S, the owner of the neighbouring farm under which S would sell 50 acres of the farm to A. Instead of payment in cash, the agreement entailed the transfer of 30 000 already bottled wine which S plans to resell.
The market value of 300 bottles of wine (a 225 litre barrel) amounted to R10 500 with bottling at R46 per bottle. The price for 300 bottled wine thus amounted to R24 300 [R10 500 + R13 800 (R300 × R46)]. The cost of the 30 000 bottles of wine was R2 430 000 (R24 300 × 100). The market value of the 50 acres of land was R3 million at the time of the barter transaction.
You are required to determine the amount to be included in Farmer A’s taxable income.
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- Farmer A is a lucrative wine farmer in the Western Cape. To expand farming operations, A entered into an agreement with S, the owner of the neighbouring farm under which S would sell 50 acres of the farm to A. Instead of payment in cash, the agreement entailed the transfer of 30 000 already bottled wine which S plans to resell. The market value of 300 bottles of wine (a 225 litre barrel) amounted to R10 500 with bottling at R46 per bottle. The price for 300 bottled wine thus amounted to R24 300 [R10 500 + R13 800 (R300 × R46)]. The cost of the 30 000 bottles of wine was R2 430 000 (R24 300 × 100). The market value of the 50 acres of land was R3 million at the time of the barter transaction. determine the amount to be included in Farmer A’s taxable income?7. Rus exchanged a number of used trucks plus cash for semi-truck. The used trucks have a combined book value of $42,000 (Cost $64,000). Rus purchasing agent who is experienced in the second hand truck market, determined the used trucks have a FMV of $49,000. Also in addition to providing the trucks. Rus most also pay $11,000 cash for the semi truck if the exchange has commercial substance then what is the basis of the semi-truck for Rus? Thank you brendaButler Corp. (BC) sells its stainless-steel products on terms of “2/10, net 40”. BC is considering granting credit to retailers with total assets as low as $400,000. Currently the lowest asset limit is $850,000. BC believes sales will increase $10 million from the new credit group but the average collection period for this new group will be 80 days versus the current average collection period of 30 days. If management estimates that 40% of the new customers will take the cash discount and 10% of the new business will be written off as bad-debt loss, should BC lower its credit standards? Assume BC’s variable cost ratio is 0.80 and its required pretax rate of return on current assets investment is 14%. BC also estimates that an additional investment in inventory of $750,000 is necessary for the anticipated sales increase
- BIC Co. is residing in Spain and exports bottles of wine in its Mexican Market for 225 Mexican Peso each bottle which costs BIC Co. 50 Pounds from wine distillery in United Kingdom. Exchange rates identified are the following for June 10, 2022:· 1 Euro = 15 Mexican Peso = 10 PoundsHow much total gross profit in Euro doesBIC Co. made for June 10, 2022 considering the firm exported 3,000 wine bottles?National Co. is residing in Spain and exports bottles of wine in its Mexican Market for 225 Mexican Peso each bottle which costs National Co. 50 Pounds from wine distillery in United Kingdom. Exchange rates identified are the following for June 10, 2022:· 1 Euro = 15 Mexican Peso = 10 PoundsHow much total gross profit in Euro does National Co. made for June 10, 2022 considering the firm exported 3,000 wine bottles?Integrity Company sold consumer products that are packaged in boxes. The entity offered an unbreakable glass in exchange for two box tops as a promotion during the current year. The cost of the glass was P200. The company sold 200,000 boxes of the product and 40,000 box tops were redeemed during the year. The entity estimated at the end of the year that it would be probable that 50% of the box will be redeemed. The allocated transaction price for the premium is P5,000,000.How much is the Unearned Revenue for Unredeemed Premiums?
- Assume that Kwek-kwek Corp. participates in a customer loyalty program operated by Suka Corporation where it grants 1 point for every P200 spent on its oil products. Accumulated points by customers from Kwek-kwek Corp. may be used to settle part or in full any merchandise purchased from Suka Corporation. Kwek-kwek Corp. pays Suka P1 for each point redeemed. In 2021, total sales of the Kwek-kwek Corp. amounted to P10,000,000. Only 45% of the 100% expected total points granted were redeemed by the customers from Suka Corporation which was used to fully settle the purchase of goods during the year. How much is the expense to be recognized by Kwek-kwek in 2021 related to the transaction?Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $66,000 and earn an additional $13,000 if Highgate achieves $130,000 of cost savings. Leo estimates a 70% chance that Highgate will achieve $130,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract ?Laguna Grill a chain of seafood restaurants. On September 1, 2018, Laguna Grill determined that it will need to purchase 100, 000 kilos of tuna fish on January 1, 2020. Because of the volatile fluctuation in the price of tuna fish, on September 1, 2018, Laguna Grill negotiated a forward contract with a reputable financial institution for Laguna Grill to purchase 100, 000 kilos of tunafish on January 1, 2020, at a price of P8,000,000 or P80 per kilo. The perpetual system is used. On December 31, 2018, the market price of tuna fish per kilo is P90 and on December 31, 2019, and January 1, 2020, the market price of tuna fish per kilo is P75. The appropriate discount rate is 12% and the present value of 1 at 12% for one period is .893. Required: Prepare all indicated entries for 2018, 2018, and 2020 to record the forward contract and the purchase of fish. The forward contract is designated as a cash flow hedge.
- Laguna Grill a chain of seafood restaurants. On September 1, 2018, Laguna Grill determined that it will need to purchase 100, 000 kilos of tuna fish on January 1, 2020. Because of the volatile fluctuation in the price of tuna fish, on September 1, 2018, Laguna Grill negotiated a forward contract with a reputable financial institution for Laguna Grill to purchase 100, 000 kilos of tuna fish on January 1, 2020 at a price of P8,000,000 or P80 per kilo. The perpetual system is used. On December 31, 2018, the market price of tuna fish per kilo is P90 and on December 31, 2019 and January 1, 2020, the market price of tuna fish per kilo is P75. The appropriate discount rate is 12% and the present value of 1 at 12% foe one period is .893. Required: Prepare all indicated entries for 2018, 2019 and 2020 to record the forward contract and the purchase of fish. The forward contract is designated as a cash flow hedge. Present this in a clean manner. Show your solution accordingly.laguna grill a chain of seafood restaurants. on september 1, 2018, laguna grill determined that it will need to purchase 100, 000 kilos of tuna fish on january 1, 2020. because of the volatile fluctuation in the price of tuna fish, on september 1, 2018, laguna grill negotiated a forward contract with a reputable financial institution for laguna grill to purchase 100, 000 kilos of tuna fish on january 1, 2020 at a price of p8,000,000 or p80 per kilo. the perpetual system is used. on december 31, 2018, the market price of tuna fish per kilo is p90 and on december 31, 2019 and january 1, 2020, the market price of tuna fish per kilo is p75. the appropriate discount rate is 12% and the present value of 1 at 12% foe one period is .893. required: prepare all indicated entries for 2018, 2018 and 2020 to record the forward contract and the purchase of fish. the forward contract is designated as a cash flow hedge. Please show your solution neatly. Ill be waiting.Tau Limited is a manufacturing business that sales high quality kitchen electronic products. Tau Limited has just entered into 25 lucrative contracts with customers in the SADC region. Each of the contacts includes the sale of one product for P3,000. To manufacture each of these products it cost Tau P2 000 a product. In the contacts, one of the terms is that cash is received upfront and control of the product transfers on delivery. Furthermore, customers can return the product within 30 days to receive a full refund. Tau still has an option of selling the returned products for profit. Tau Limited has been in business for many years and from his experience he can estimate returns for this product quite accurately. Tau has estimated that that 23 products will not be returned. Required: How should the above transaction be accounted for?
