Courts also generally consider the following factors in determining whether a trade or business exists: the extent and nature of sales efforts, the number, continuity, and regularity of sales, the extent to which the taxpayer attempts to increase sales by improving the property and advertising, the time and effort devoted to sales by the taxpayer (U.S. v. Winthrop, 417 F.2d 905 (5th Cir. 1969). One court described the inquiry as whether the taxpayer "has engaged in a sufficient quantum of focused activity to be considered to be engaged in a trade or
If subsequently resold for a sum larger than the cost, Alcoa should report for the sale of the treasury stock by debiting cash for the sale cost, crediting treasury stock for cost, and crediting additional paid-in capital from repurchased stock for the excess of the selling price over the cost. Adversely, if the stock is retired, Alcoa
The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle). Requirement 2 – B Hudson’s wholesale inventories should be reported on the balance sheet at the replacement cost amount. The text indicates that the replacement cost is less than the NRV (or ceiling) and more than the NRV-NP (or floor) making the
NeedsSpace should clarify with WeHaveIt about the statement “general repairs and maintenance” and what is specifically makes NeedsSpace liable for. If the lease required NeedsSpace to make deposits and set up a “repair and maintenance reserve,” the deposits would be recognized as an asset and reimbursed at the conclusion of the lease, less any repair and maintenance costs (ASC 840-10-5-9a to 9c). Since the lease does not explicitly require NeedsSpace to make maintenance deposits, NeedsSpace should expense any repairs as they are performed so the money is sitting in their bank account, not WeHaveIts account. Also, it should be noted that “the accrual method of accounting for planned major maintenance activities is prohibited in annual and interim financial reporting periods” (ASC 360-10-25-5). Therefore, NeedsSpace would not be able to set up an account that allows them to account for future
President of Acer Corp, The purpose of this letter is to provide guidance to Acer Corp on the appropriate accounting for the Theta investment. Below is an overview of the transaction followed by our findings and authorities used for the basis of our conclusions under both US and International accounting standards. From our research, it is more beneficial for Acer to headquarter in the US where only partial gains from the transaction must be recognized. This transaction included the transfers of factory equipment to Theta Corp in exchange for $1 million cash and a 25% equity ownership stake in Theta. The book basis of the transferred equipment was $6 million, and the equipment was recently appraised for $6.5 million.
I understand your concern for the financial statements. Thank you for the questions you asked concerning the effect on your financial statements if you lost the lawsuit. You have various questions regarding the mortgage, Chapter 11, patent impairment, and contingencies in the event Fabrikam lose the lawsuit. Filing Chapter 11 does not forgive debts. Rather, it only reorganizes debts and formats them for you to repay over time.
Additionally, if the quantity or quality of the assets productivity is increased capitalize cost of improvements or replacement to the asset account. It is also important to consider whether the item being repaired is already capitalized and being depreciated and whether it is being separately tracked or considered part of a larger asset. If the item is capitalized and being separately tracked, dispose of this asset on the books and capitalize the repair and maintenance addition. This avoids having the same asset on the books twice with both being depreciated. Moreover, Small Fries Inc. should not report the repairs and maintenance in their balance sheet as aggregate cost but instead designated the expense to each facility as each expense is incurred.
Known in this case as Johnson Services which has accumulated significant losses. Issues: 1. Outstanding purchase of stock (a) Mr. Jones would like to know if he should purchase the stock of Smithton outright, leaving Smithton intact. He also wants to know if he issues debt in his Johnson Services to pay for the Smith Company would that raise debt to equity issues (b) Mr. Jones also wanted to know should he convert Smithton to an S Corporation and change the fiscal year to a calendar year. (c) Mr. Jones also asked what are the potential tax ramifications that exist for
Material participation is a concept used by the law to determine what qualifies as a passive activity. A passive activity is defined as any business or trade activity that the taxpayer does not materially participate in running. Therefore, material participation as a concept helped with the difficulty in dealing with such a subjective issue. It is important to distinguish passive income from active income, since losses are treated differently under each classification on the taxpayer’s tax return. Problems:
To be recognized, revenues must also be realized or realizable and A. Foreseeable B. Collected C. Earned D. Shipped Original AACSB: Analytic AICPA BB: Legal AICPA FN: Research Bloom's: Knowledge Difficulty: Easy 2. The SEC requires all of the following for revenue to be recognized except A. Cash is collected.