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    Question-Eng

    Uploaded by

    Alexandre Long

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Question-Eng

    Uploaded by

    Alexandre Long
    1 views2 pages

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    © © All Rights Reserved

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    Copyright:

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    1 views2 pages

    Question-Eng

    Uploaded by

    Alexandre Long

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Question 1

    Sao Co. purchased a machine for $11,500, terms 2/10, n/30 (2% discount if paid within 10
    days, full amount due within 30 days), FOB shipping point. Sao Co. paid for the machine
    within the discount period. The seller prepaid the freight charges, $260, adding the amount to
    the invoice and bringing its total to $11,760. The machine required a special steel mounting
    and power connections costing $795, and another $375 was paid to assemble the machine and
    get it into operation. In moving the machine onto its steel mounting, it was dropped and
    damaged. The repairs cost $190. Later, $30 of raw materials were consumed in adjusting the
    machine so that it would produce a satisfactory product. The adjustments were normal for this
    type of machine and were not the result of the damage. However, the items produced while the
    adjustments were being made were not sellable.

    What is the capital cost of the property for tax depreciation purposes?

    Question 2
    To operate her business, the taxpayer is considering the purchase of a small building. The
    building is old, and some repairs will have to be done. She wants to know if the expenses for
    repairs to the building will be entirely deductible in the year they are made. The following
    expenses are anticipated:
     installing a new roof
     painting the premises
     electrical rewiring of the whole building
     repairing a few broken windows
    Are the expenditures deductible in the year or must they be capitalized and depreciation
    claimed?

    Question 3
    Rose Co., Ltd. acquires a building in 2020 for $80,000 US dollars and a second building in the
    same year for $50,000. In 2021 Rose Co., Ltd. disposes of building 1 for $90,000

    What will be the tax effects of these transactions in 2021?

    Question 4
    Sok Limited acquires 2 pieces of truck in 2020 for $80,000 and $50,000 respectively. Sok
    Limited disposes of the first truck in 2021 for $85,000. Truck is class 3, declining balance
    calculation on a pooled basis.

    What are the tax effects of these transactions in 2021?

    Question 5
    Sok Limited acquires 2 pieces of truck in 2020 for $80,000 and $50,000 respectively. Sok
    Limited disposes of the first truck in 2021 for $105,000. Truck is class 3, declining balance
    calculation on a pooled basis.

    What are the tax effects of these transactions in 2021?

    Lecturer: Eng Tita Page 1 of 2


    Question 6
    Sok Limited acquires 2 pieces of truck in 2020 for $80,000 and $50,000 respectively. Sok
    Limited disposes of the both trucks in 2021 for $50,000 and does not replace them. Truck is
    class 3, declining balance calculation on a pooled basis.

    What are the tax effects of these transactions in 2021?

    Question 7
    An enterprise purchases on 15 October 2015 a sofa at a cost price of 18,000,000 Riel. This
    sofa has useful life of 8 years and for accounting purposes is regularly depreciated at each end
    of period by the straight line method except in 2017 when it has a big loss. For tax purposes,
    depreciation is claimed in every year except 2017. The sofa is sold on 10 June 2021 for
    8,000,000 Riels. It is not replaced and there are no other assets in the pool.

    What are the tax effects of these transactions in 2021?

    Note:

    Declining balance class

    Everything pooled to in class

    (1) if positive balance at the end of year & assets in pool => depreciation
    (2) if positive balance at the end of year & no assets in pool => capital loss
    (3) if negative balance at the end of year => capital gain

    Matching principle/ available for use applied on pool but not on individual assets

    Lecturer: Eng Tita Page 2 of 2

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