Exam (elaborations)
TAX 4001 Assessment-Ch 7.
TAX 4001 Assessment-Ch 7.
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TAX 4001 Assessment-Ch 7(inv) at the end of the year, calculate - ANS-how much inv on hand and how much inv
sold in the year
(purchase vs lease) managers should choose the option that minimizes - ANS-after-tax
cost of acquisition in PV terms
15 or 20 yr depr per use _______, applies to ______ - ANS-150% declining balance
method
some personalty, warehouses, and buildings
1986, congress reformed cost recovery system for tax purposes into - ANS-Modified
Accellerated Cost Recovery System (MACRS)
2 consequences to deducting a portion of capitalized cost of an asset: - ANS-1) assets
initial tax basis is reduced by the asset
2) deduction generates tax savings that reduce the after-tax cost of the asset
25, 27.5, 39, or 50 yr recov per use________, applies to _______ - ANS-straight-line
depr method
realty
3 ways to achieve a tax basis: - ANS--Purchase (cost basis)
-Gift (donor basis; must pay gift tax)
-Inheritance (FMV on day of person's death)
3, 5, 7, or 10 yr depr per use________, applies to _______ - ANS--200%
Double-declining balance
-personalty
Advertising costs (are or are not?) deductible even though ______ except in _____ -
ANS--are
-successful campaign can incr market share and improve competitive position for years
to come
-unusual situations; must be capitalized
After tax cost of rent/lease option = - ANS-PV of yr 0 pymt + PV of yrs 1-n pymt
, After-tax cost of purchase option = - ANS-Purchase price - Sum of PV of tax savings
from depreciation
allocation between ending inv and COGS based on - ANS-method of accounting by
which firm tracks flow of inventory through system
annual depreciation for passenger automobile placed in service in 2018 limits: -
ANS-2018: 10,000
2019: 16,000
2020: 8,600
2021 and beyond: 5,760
annual depreciation for passenger automobiles may not exceed - ANS-annual limits
provided under a special schedule, which is adjusted annually for inflation;
-calculate depreciation as normal and then apply limit;
-cannot carry forward undepreciated amounts
any reduction in taxable income attributable to LIFO is mirrored by - ANS-a reduction in
accounting income and earnings per share reported to the firm's investors
basic premise regarding expenditure deductions - ANS-no expenditure is deductible
unless authorized by IRC
basis can be 0, but never - ANS-<0
building improvement deductions - ANS-may deduct cost of improvements, not to
exceed the lesser of (a) 10,000 or (b) 2% of the buildings unadjusted basis
Buildings are depreciable, but _____ is not - ANS-land
cannot avoid passenger automobile annual depreciation by ______ instead of
purchasing; why? - ANS-leasing; lease payment deductions limited in manner that is
"substantially equivalent" to depr limitation
Capitalization - ANS-expenditure is recorded as an asset on balance sheet
coast basis is reported on - ANS-the balance sheet
corporations (do or do not?) recognize gain on the receipt of cash in exchange for stock
- ANS-do not
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