Name: _____________________________ SID: ______________
THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF ACCOUNTING ACCT 5942: CORPORATE ACCOUNTING & REGULATION INCOME TAX QUIZ, SESSION 1 2012
Time allowed: Number of Questions:
Thirty minutes (no reading time) 15
INSTRUCTIONS 1. Before starting the examination complete your personal details requested on the Answer Sheet and on this Examination Booklet. 2. You must record all your answers to the multiple-choice on the computerized Answer Sheet during the thirty minute quiz time. Students will not be given credit for responses recorded on the Examination Booklet. 3. The exam is comprised of 15 multiple choice questions. Each question is of equal mark and there is no negative
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credit Deferred tax liability $27 000 e. none of the above.
2
The following information should be used to answer Questions 8 to 12 Accounts receivable – gross Allowance for doubtful debts Accounts receivable – net Plant at cost – gross Accumulated depreciation Plant at cost – net Land at fair value Development costs ‐ gross Accumulated amortisation Development costs – net Interest receivable Provision for long service leave Asset revaluation reserve Accumulated depreciation for income tax $ 200,000 (10,000) 190,000 600,000 (120,000) 480,000 600,000 200,000 (80,000) 120,000 20,000 60,000 100,000 240,000
Question 8 The calculation of the tax base for accounts receivable is as follows: Carrying amount 190,000 200,000 190,000 200,000 200,000 Less Assessable Amount 190,000 200,000 0 0 0 Add Deductible Amount 10,000 10,000 10,000 0 10,000 Equals Tax Base 10,000 10,000 200,000 200,000 210,000
A B C D E
Question 9 The calculation of the tax base for plant is as follows: Carrying amount 600,000 480,000 600,000 480,000 480,000 Less Assessable Amount 600,000 480,000 600,000 480,000 0 Add Deductible Amount 120,000 240,000 240,000 360,000 0 Equals Tax Base 120,000 240,000 240,000 360,000 480,000
A B C D E
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Question 10 The calculation of the tax base for land is as follows: Carrying amount 500,000 600,000 600,000
Please answer all questions in this exam. Answers to the multiple choice questions need to be filled in on the scantron sheets (remember to use pencil to fill in the circles) and also circled on the exam itself. Answers to the short answer questions should go in the exam booklet provided. All three components (scantron sheets, exam booklets, paper copy of exam) should be turned in at the conclusion of the exam.
Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.
Section 360-10-35-17 of the Code states that an impairment loss shall be recognized if the carrying value of a fixed asset is not recoverable and exceeds its fair value. The carrying value of the fixed asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and disposal of the asset. An impairment loss shall be measured by the amount by which the carrying value exceeds the fair value.
Depreciation Schedule Year 0 1 2 3 4 5 6 7 8 9 10 Building 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 Equip 142857.1429 142857.1 142857.1 142857.1 142857.1 142857.1 142857.1 0 0 0 Dep Exp 152857.1429 152857.1 152857.1 152857.1 152857.1 152857.1 152857.1 10000 10000 10000 Tax Credit 42800 42800 42800 42800 42800 42800 42800 2800 2800 2800
Three examinations will be administered. The exams will consist of multiple choice questions and problems. Problems will be similar to those covered in class or those given as homework assignments.
- Complete all of the details required on the front page of the examination booklet. - Make sure that you note the SIX(6) questions attempted on the front of your examination booklet - If Seven questions are attempted, the first SIX(6) will be marked. - You may use a non-programmable calculator - Graph paper will be provided. - Answers are to be written in ink. Pencils are permitted for graphing purposes. - The
| Textbook pages 11-12. Assets = $12,000 + $50,000 = $62,000. Cash and inventory are examples.
| In Year 1, depreciation is $5,000 plus 15% of the asset’s outlayFrom Year 2, depreciation is either * 30% of the asset’s book value; or * if the asset’s book value is less than $6,500, depreciation is the asset’s book value (i.e. asset is depreciated to zero once book value < $6,500)
In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.
Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding
Because $2.3 million is less than the Carrying Value of the asset group of $4.7 mm, ($2.3 million < $4.7 million), The Impairment loss will be Fair Value of Asset less carrying amount of asset group.
. (TCO 2) Barry owns a 30% interest in a partnership that earned $300,000 this year. He also owns 30% of the stock in a C corporation that earned $300,000 during the year. The partnership did not make any distributions, and the corporation did not pay any dividends. How much income must Barry report from these businesses? (Points : 2)
All costs paid or incurred for producing a live or delayed television program, including license fees paid to a third-party, are added to the unadjusted depreciable basis; however, the license fees shall exclude from computing the direct labor and overhead. For instance, if a taxpayer incurs $200 ($20 for direct labor, $100 for license fees paid for third-party, $80 for property rental for broadcast) of total costs for a production of broadcast, so the unadjusted depreciable basis as the denominator for the film would $200, and the direct labor and overhead cost as numerator would be $100. Refer to §199, the taxpayer is qualified for computing the safe harbor for film production. While the taxpayer does not incur $80 for property rental, the unadjusted depreciable basis would be $120 and the direct labor would be $20. Based on calculation, the taxpayer does not satisfy the 20 percent requirement, so under this circumstance, the license fees paid to the third-party could not help the taxpayer apply for safe harbor.
ii. Using double- declining method, the first year ending balance of $6,404 is subtracted form the proceeds of the sale netting in a gain of $1,096 on the disposal. Once this is subtracted form the previous years depreciation $4,269, you get a total income statement impact of $3,173.
iii. “Equipment and Property Under Capital Lease: Flight Equipment” will be reported as $8,869 which is equal to the original present value of the lease ($323) plus the converted amount ($8,546).