ADVANCED ACCT.,SEL.CH.-W/ACCESS>CUSTOM<
14th Edition
ISBN: 9781307566574
Author: Hoyle
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 13Q
To determine
Identify the effect which this change has on the business combination’s reporting.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
A subsidiary that has a net operating loss carryforward is acquired. The related deferred income tax asset is $230,000. Because the parent believes that a portion of this carryforward likely will never be used, it also recognizes a valuation allowance of $150,000. At the end of the first year of ownership, the parent reassesses the situation and determines that the valuation allowance should be reduced to $110,000. What effect does this change have on the business combination’s reporting?
Downdraft has a net operating loss of $1,000,000 and no remaining assets. Everhopeful Inc buys the shares of Downdraft for $30,000 hoping to shelter its future income with Downdraft's NOL. At the time of the acquisition the government long-term tax exempt rate is 2%. The year after the acquisition the new combined entity has taxable income before any NOL deduction of $50,000.
37. How much of the Downdraft NOL can the combined corporation use?
38. Using the facts of the previous question suppose the taxable income for the combined entity for the year after Everhopefull acquired Downdraft was $500. How much of the Downdraft NOL could the combined entity use?
please answer both
The company has the opportunity to engage in a transaction that will generate a total cash of $180,000 that will be considered a taxable income in the year received. Pioneer will receive $100,000 in year 0 and $80,000 in year 1. The company has the option to restructure the above transaction and receive $107,500 in year 0 and $80,000 in year 1. However, Pioneer should recognize the total amount received as a taxable income in year 0. The company’sinvestment manager rejected the restructure of the above proposal. Assume the company uses 8% discount rate and has a marginal tax rate of 35%. Do you agree with the investment manager decision? Assuming you disagree, provide the appropriate calculations and explain your recommendation
Chapter 7 Solutions
ADVANCED ACCT.,SEL.CH.-W/ACCESS>CUSTOM<
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 26P
Knowledge Booster
Similar questions
- Berny Ltd owns 100 per cent of Cozy Ltd. On 1 July 2019 Berny Ltd sells an item of plant to Cozy Ltd for $3.6 million. This plant cost Berny $4.5 million and had accumulated depreciation of $1.8 million at the date of the sale. The remaining useful life of the plant is assessed as 12 years and the tax rate is 30 per cent. Required: a) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2020 b) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2021arrow_forwardChoose the correct. How does the amortization of tax-deductible goodwill affect the computation of a parent company’s income taxes?a. It is a deductible expense only if the parent owns at least 80 percent of subsidiary’s voting stock.b. It is deductible only as impairments are recognized.c. It is a deductible item over a 15-year period.d. It is deductible only if a consolidated tax return is filed.arrow_forwardGold Company, a calendar year taxpayer, sold two operating assets this year (each held for over a year). The first sale generated a $20,000 Section 1231 loss, and the second sale generated a $30,000 Section 1231 gain. As a result of these sales, Gold should recognize: Group of answer choices No gain or loss $10,000 gain treated as capital gain $10,000 ordinary income $20,000 ordinary loss and $30,000 gain treated as capital gainarrow_forward
- Watanabe Corporation is selling one of its assets for $1,700. The asset originally cost $10,000. It has been depreciated under MACRS using a five-year recovery period, and it has been depreciated for four full years. Assume that the tax rate is 40 percent on both ordinary income and capital gains. What are the tax effects of this transaction? Jellibean Corporation will replace one of its existing assets with a newer type. The existing asset was purchased two years ago at a cost of $30,000 and was being depreciated under MACRS using a five-year recovery period. This existing asset can be sold for $25,000. The new asset that they plan to buy will cost $75,000 and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40 percent on both ordinary income and capital gains, the initial investment will be equal to what amount after adjusting for taxes? Calculate the initial purchase price for an asset that has a book value of $34,800 and has…arrow_forwardBig Balooga Inc. (BB) makes specialized diving equipment. Selected financial information for BB for the year ended December 31, 2019, follows. BB is a public company listed on the TSX. BB disposed of a subsidiary during the year that met the criteria of a discontinued operation and was classified accordingly. The subsidiary's pre-tax loss was $400,000. The pre-tax gain on disposal was $200,000. • BB's pre-tax income for the year from continuing operations totalled $2,200,000. BB's effective tax rate is 20%. Required Prepare BB's statement of profit or loss for the year starting with income from continuing operations before tax. Do not report EPS.arrow_forwardBig Balooga Inc. (BB) makes specialized diving equipment. Selected financial information for BB for the year ended December 31, 2019, follows. BB is a public company listed on the TSX. BB disposed of a subsidiary during the year that met the criteria of a discontinued operation and was classified accordingly. • The subsidiary's pre-tax loss was $400,000. The pre-tax gain on disposal was $200,000. • BB's pre-tax income for the year from continuing operations totalled $2,200,000. • BB's effective tax rate is 20%. Required Prepare BB's statement of profit or loss for the year starting with income from continuing operations. Do not report EPS.arrow_forward
- Renata Corporation purchased equipment in 2019 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2021 for $110,000. What is the amount and character of Renata's gain or loss? Renata Corporation has a gain of $ of which $ is treated as ordinary income due toarrow_forwardThe Grape Corporation owns equipment with a $400,000 adjusted basis. The equipment was purchased six years ago for $640,000. Assume Grape sells the equipment for the selling prices given in the three independent cases below. View the three independent cases. Read the requirement. Begin by entering the amount of the recognized gain for each case. Then enter the character of the gain or loss for each case. (Use a minus sign or parentheses to enter a loss. Complete all input fields. Enter a "0" for any zero-balances.) Case A Case B Case C Selling Price $237,000 $729,000 $424,000 Recaptured Recognized Gain Ordinary Gain Sec. 1231 Gain (Loss) (Loss) (Loss) Three Independent Cases Selling Price Case A S 237,000 Case B 729,000 Case C 424,000 Print Done Xarrow_forwardafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS 1. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?arrow_forward
- Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability?arrow_forwardTafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability? 2. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?arrow_forwardABC Corp earns $300,000 of taxable income. $50,000 of that income is non-active rental income, and the remaining $250,000 is active business income. How much tax paid by ACB on their income will be refundable? O 22500 15,335 92,010 Dirk has decided to transfer his equipment to a new corporation using Section 85. The equipment has a cost basis of $1,000, a UCC balance of $800, and a fair market value of $1,500. What is the ceiling of the elected amount under Section 85. 1000 1500 800arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you