INTERMEDIATE ACCOUNTING II/ Intermediate Accounting, Spiceland/Sepe/Nelson Re: Judgment Case 18-5 Requirement 1. The two alternatives Alcoa has for accounting for the repurchase of it’s shares are: 1) The shares can be formally retired. 2) The shares can be named treasury stock Either way, total shareholders’ equity remains the same. Cash is used to repurchase common stock so the effect is to reduce both cash and shareholders’ equity. This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet.
I have determined that you have to account for all qualified business expenses and only net income will be taxable. 2. Jane Smith tax issues: a. What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes? If the mortgage is paid off, you'll lose the mortgage deduction on your federal income taxes.
According to "Accrual" (2012),” Cash-basis accounting does not recognize promise to pay or expectations to receive money or service in the future, such as payables, receivables, and prepaid expenses”. Cash basis accounting is a simple and inexpensive method to implement and utilize. Small business owners without a strong accounting background often use cash basis accounting. Even though, both cash basis accounting and accrual basis accounting are approved accounting methods for tax purposes, only accrual basis accounting is generally accepted accounting principles (GAAP). Generally accepted accounting principles requires certain companies to use the accrual basis accounting to
The revenue is recorded even if cash has not been received or if expenses have been incurred but no cash has been paid. Accrual accounting is the most common method used by businesses. Cash Basis Accounting is the accounting system that recognizes cash when it is received and bills when they are paid. In the Accrual Basis Accounting revenue is recognized when it is earned and expresses when bills are received, regardless of when cash changes hands. Cash bashes only records revenue when cash is received.
30% Withholding Tax Nonresident individuals earning rental income and other fixed and determinable annual or periodic income which are not effectively connected with trade or business are taxed at a flat rate of 30%, withheld by the tenant. Electing Business Income Option Nonresident individuals earning rental income can elect to consider this income as effectively connected with trade or business. Through this option, the taxpayer will be taxed on his net income at progressive rates. CAPITAL GAINS TAX Capital gains incurred for the transfer of property in Guam is taxed as in the US. The taxable gain is computed by deducting the acquisition costs (adjusted for inflation) and transfer costs from the selling price.
("The Principles of Commercial Accounting and Fund Accounting", 2011). Accrual vs. Cash Basis Accounting According to the readings, accrual base accounting is defined as in which businesses record, in the periods in which the actions occur, transactions that alter a company's financial statements, even if cash was not traded. In other words, it means that recorded or un-recorded, all dealings are taken and estimated into the overall balance. Cash Basis Accounting, in which an establishment accounts revenue only when it collects cash and an expense only when it pays out cash. This method means that accountants, only takes accountability of the physical cash that is exchanged.
Cash and Accrual Basis for Accounting ACC/290 There are few differences between accrual versus cash basis accounting. The defining difference in when a transaction is recorded. In cash basis accounting businesses record the cash (credit, check, etc) when it is given or received. For instance, if they place an order for supplies they only record when the supplies are paid for not entered into accounts payable to be reconciled later. Another instance is recording rent when it is paid not delineating what is promised (unearned rent revenue) and when it is paid (rent revenue).
As a business owner I would use accrual method only because it recognizes Receivables and payable. When using the cash basis a company can appear that it is earning profit when in fact it is loosing funds. Cash basis does not acknowledge money that is owed which make is very difficult to keep accurate records. The IRS generally requires companies to use the cash accrual basis of accounting on their tax return. The Internal revenue service does allow the cash method of accounting if certain criteria are met because tax laws change frequently it is essential to contact a CPA if a business owner decides to use cash basis of accounting.
optimum rate top); tax fraud increase as a function of tax rate. However, tax fraud decrease or doesn’t change in function of tax rate. We can schematize this result in the following graph: Figure 4: tax fraud as a function of tax rate for C1 and C2 3.2. EUT Model with some new assumptions 3.2.1. EUT Model To use the advanced of the model of Allingham and Sandmo 1972, taxpayer's behavior is consistent with the axioms of von Neumann-Morgenstern utility function and is solely dependent on disposable income.
Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest cost. Page 1 of 6 b. c. d. Borrowing cost that entitles for tax deduction under subsection 33(1) of ITA 1967 does not include legal fee, guarantee fee, professional fee and other fees/costs incur for obtaining the loan except for entity on which money is its stock in trade. 2. OBJECTIVE The objective of these Guidelines is to