PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Chapter 8, Problem 9AP
Refer to the facts in problem 7. In the first year after the year of sale, TPW received payments totaling $106,900 from the purchaser. The total consisted of $67,500 principal payments and $39,400 interest payments.
- a. Compute TPW’s gain recognized under the installment sale method.
- b. Compute TPW’s tax basis in the note at the end of the year.
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Asnwer in 30 minutes
Sherrod, Inc., reported pretax accounting income of $76 million for 2021. The following information relates to differences between pretax accounting income and taxable income:
Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $7 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the…
Chapter 8 Solutions
PRINCIPLES OF TAXATION F/BUS.+INVEST.
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