By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. 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).
Costing Model: There are two costing models that can be used to allocate costs: traditional costing and activity based costing. Both costing models allocate direct material costs, direct labor costs and manufacturing overhead costs to the products being manufactured. However, the difference between the two models involves how the manufacturing overhead costs are allocated. Traditional costing allocates overhead costs to the products manufactured on the either direct labor hours, number of units produced, or machine hours used in production. The traditional costing method lumps all overhead costs into a single pool and allocates those costs across all products produced based on one of the three cost drivers (direct labor hours, number of units produced, or machine hours).
Code Sec. 61(a)(1) of the Internal Revenue Code (“IRC”) states that the general definition of gross income is “all income from whatever source derived, including (but not limited to) the following items: compensation for services, including fees, commissions, fringe benefits, and similar items.” IRC section 451(a) states “the amount of any item of gross income shall be included for the taxable year in which received by the taxpayer, unless under the method of accounting use in computing taxable income, such amount is to be properly accounted for as of a different period. Since the $300,000 received a fee in the form of compensation, it is gross income as defined under Code Sec. 61(a)(1) and John must include the $300,000 fee with his gross income for the current year while preparing his income taxes per Code Sec. 451(a).
According to the Internal Revenue Code Sec. 61(a), gross income includes “all income from whatever source derived” unless specifically exempted by law. Under this code, the $300,000 is considered gross income since this is income earned by performing services as a part of John’s trade. b. How is the $25,000 treated for purposes of federal tax income?
should conduct impairment testing on all of their patents at each reporting period. The impairment test should consist of comparing the fair value of the intangible asset with its carrying book value. If the carrying book value of the intangible asset surpasses its fair value, an impairment loss must be recognized in the amount equal to that excess amount. Therefore, I recommend that XYZ Research Co. conduct impairment testing on all of their patents, capitalized or not, at the end of each reporting period. References 350-30-25: Intangible - Goodwill and othe; General Intangibles Other Than Goodwill; Recognition.
The income statements of service business normally have separate sections for operating revenues, operating expenses, and other income (expenses). In contrast, those of retailers, wholesalers, and manufacturers disclose sales revenue, followed immediately by cost of goods sold and gross margin. Operating expenses are listed next followed by other income (expenses). 4. The basic difference falls in the area of inventory.
When we determine the method for recognizing revenue for the Power Starterpack, we should consider which deliverable and unit of accounting. In order to identify this issue, I will discuss it from three different situations. 1. The activation card is not a separate deliverable and not a separate unit of accounting. First, according to the ASC 605-25-25-6, “a delivered item or items that do not qualify as a separate unit of accounting within the arrangement shall be determined for those combined deliverables as a single unit of accounting.” If the Power starterpack is not a separate deliverable, it shall be considered as a single unit of accounting, which is not a separate unit of accounting.
Issue: What are Mary’s income tax consequences of the transaction at 30/06/2013? Rules: Section 6-5(2) it has defined resident’s assessable income includes the ordinary income derived directly or indirectly from all sources whether in or out of Australia during the year of income. Section 15-15 “Profit-making undertaking or plan” which is defined to “Brings into assessable income the profit from the carrying or carrying out of a profit making undertaking or plan”, (similar to Section 25A ITAA36). Taxation ruling TR 92/3 is defined the isolated transaction is generally assessable if the taxpayer has any intention or purpose entered into the transaction was to make a profit or gain or this transaction was made in the course of carrying
Taxable Supply – is everything which is not exempt or outside the scope of VAT. It includes sales and purchases of most goods and services. There is three different rates that VAT can be charged. Business – For vat to apply the taxable supply must be made in the course or furtherance of a business carried on by a taxable
Management 371,101.00 total variable cost 691,691.00 Other + 79,888.00 Total fixed cost 624,989.00 Breakeven point for 2003 PX=A+BX P=1,244,261/6,821 =182.42 X= breakeven point A=624,989.00 B=542,105/6,821= 101.41 182.42X= 624,989+101.41X (subtract 101.41 from both sides) 81.01X=642,989 (divide both sides by 81.01) X= 7937 BEP= 7937 Fixed cost 2004 variable cost 2004 Rent and utilities 150,000.00 payroll and benefits 915,787.00 Telephone 24,000.00 supplies + 320,525.52 Management 445,819.00 total variable cost 1,236,312.52 Other + 115,999.00 Total fixed cost 735,818.00 Breakeven point 2004 PX=A+BX P= 2,191,243/11,822= 185.35 X=breakeven point A=735,818 B=1,236,312.52/11,822=104.57 185.35X=735,818+104.57 (subtract from both sides by 104.57) 80.78X=735,818 (divide both sides by 80.78) X= 9109 BEP= 9109 Purpose, Advantages, disadvantages, and