(a) Indicate whether the following expenses are capital expenditures or operational expenses. Describe your answer. (i) An initial cash of RM1,000,000 to purchase a new plantation. (ii) A RM11,000 investment to acquire a trademark for the production of a new product line. (iii) RM79,800 has been written off as uncollectible bad debts. (iv) A RM160,000 payment for improvements to a headquarters building. (v) RM600 for repair and payment for a photocopy machine.

(a) Indicate whether the following expenses are capital expenditures or operational expenses. Describe your answer. (i) An initial cash of RM1,000,000 to purchase a new plantation. (ii) A RM11,000 investment to acquire a trademark for the production of a new product line. (iii) RM79,800 has been written off as uncollectible bad debts. (iv) A RM160,000 payment for improvements to a headquarters building. (v) RM600 for repair and payment for a photocopy machine.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 39P

See similar textbooks

Similar questions

1. The company is setting aside funds to acquire a property for its new warehouse. The company needs P74,735 to make the down payment. The company deposits P5,000/month in the fund account which pays 1% per month. As the financial manager you have been tasked to determine how long it will take to accumulate enough funds to acquire the property?
On January 1, 20x1, Entity A started the construction of a qualifying asset. The qualifying assetis financed through general borrowings. The average expenditures during the year amounted to₱9,500,000. The capitalization rate is 11%. The actual borrowing costs incurred during the periodwere ₱1,990,000. How much are the borrowing costs eligible for capitalization? a. 1,990,000 b. 1,045,000 c. 1,090,000 d. 990,000
The following data concern an investment project (Ignore income taxes.): Investment in equipment Annual net cash inflows $ 215,000 $ 56,000 $ 70,700 $ 27,000 Salvage value of the equipment Working capital required Life of the project Required rate of return 5 years Net present value 12% The working capital will be released for use elsewhere at the conclusion of the project. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Compute the project's net present value. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount.
Q: Determine the cost of the amount to be reported for the followings. JJ Company acquires real estate at a cash cost of Rs= 1,000,000. The property contains an old warehouse that is razed at Rs=40,000 in costs and Rs15,000 proceeds from salvaged materials. Additional expenditures are the attorney’s fee =Rs5,000, and the real estate broker’s commission= Rs25,000. Required: Determine the amount to be reported as the cost of the land? DD Company purchases a delivery truck at a cash price of Rs=840,000. Related expenditures are sales taxes Rs= 26,400, painting and lettering Rs=10,000, motor vehicle license Rs= 1200, and a three-year accident insurance policy Rs=30,000. Compute the cost of the delivery truck?
A lessor made an investment of ₱550,000 in equipment with an expected life of 5 years. He expects and incremental revenue of ₱460,000 while costs to be incurred are: Costs of sales₱120,000; Marketing, admin, and maintenance ₱150,000. Tax rate is 25%. Annual depreciation is ₱110,000. Cost of capital is 11%. The NPV would be? ₱ 87,203 ₱ 152,221 (₱ 23,334) ₱ 78,302 ₱ 63,712 ₱ 28,486
A lessor made an investment of ₱550,000 in equipment with an expected life of 5 years. He expects and incremental revenue of ₱460,000 while costs to be incurred are: Costs of sales→₱120,000; Marketing, admin, and maintenance→ ₱150,000. Tax rate is 25%. Annual depreciation is ₱110,000. Cost of capital is 11%. The NPV would be?
Assume the total sales price and cost of a property are $2,000,000 and $1,100,000, respectively, so that the total profi t to be recognized is $900,000. Th e amount of cash received by the seller as a down payment is $300,000, with the remainder of the sales price to be received over a 10-year period. It has been determined that there is signifi cant doubt about the ability and commitment of the buyer to complete all payments. How much profi t will be recognized attributable to the down payment if: 1 . Th e installment method is used? 2 . Th e cost recovery method is used?
Construct a Cash-flow diagram. An industrial plant bought a generator set for P90,000. Other expenses including installation amounted to P10,000. The generator set is to have a life of 17 years with a salvage value at the end of life of P5,000. Determine the depreciation charge during the 13th year and the book value at the end of 13 years by the (a) declining balance method (b) double declining balance method (c) sinking fund method and (d) SYD method.
On land worth P800,000 an investor constructs a building worth P3,000,000 containing a theater, a bank, stores and offices. The owner estimates that the annual receipts from rentals will be P720,000, and annual expenses to cover taxes, insurance and maintenance of the building will be P80,000. He also estimates that the land can be sold for P1,200,000, the building for P2,000,000 at the end of 20 years. If his money is now earning 15% before taxes, what is the rate of return to justify this investment?
For each of the following issues determine whether the item should be Capitalised as an intangible Expensed to the Statement of Profit or Loss (Income Statement) £200,000 spent on developing a new process that will not bring in new revenue, but will deliver cost savings £800,000 spent on developing a new product. A competitor has already brought a similar product to the market. The directors are uncertain if they will commit any further funds. £500,000 spent on marketing a new product. This has led to increased sales of £1 million £750,000 has been spent on developing a new product. The future benefits have been estimated at £500,000.
9. Entity A acquires an investment property for ₱1,000,000 cash. Additional costs incurred are as follows: • Repairs and remodeling before occupancy, ₱50,000. • Legal costs of transferring title to the property, ₱20,000. • Repairs after occupancy, ₱15,000. The investment property is estimated to have a remaining useful life of 10 years and a residual value equal to 5% of the initial cost. Entity A uses the straight-line method of depreciation. How much is the carrying amount of the investment property under the cost model after one year? a. 923,100 b. 968,350 c. 872,100 d. 914,850
Calculate and allocate basis for the following problems. 1. A property is acquired for a purchase price of $230,000 cash plus acquisition costs of $20,000. The tax assessment for this property is as follows: Assessed Value Land Improvements Total assessments $40,000 160,000 $200,000 a. What is the acquisition basis for this property? b. What is the allocation for land? c. What is the allocation for improvements?