Berny Ltd owns 100 per cent of Cozy Ltd. On 1 July 2019 Berny Ltd sells an item of plant to Cozy Ltd for $3.6 million. This plant cost Berny $4.5 million and had accumulated depreciation of $1.8 million at the date of the sale. The remaining useful life of the plant is assessed as 12 years and the tax rate is 30 per cent. Required: a) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2020 b) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2021

Berny Ltd owns 100 per cent of Cozy Ltd. On 1 July 2019 Berny Ltd sells an item of plant to Cozy Ltd for $3.6 million. This plant cost Berny $4.5 million and had accumulated depreciation of $1.8 million at the date of the sale. The remaining useful life of the plant is assessed as 12 years and the tax rate is 30 per cent. Required: a) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2020 b) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2021

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

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 44P

See similar textbooks

Similar questions

Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability? 2. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?
Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability?
afty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS 1. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?
On 1 January 2019, Metsi Limited purchased a plant for R1 500 000 cash. The plant was immediately available for use. It was determined that the plant needs to be dismantled at an estimated cost of R250 000 at the end of its useful life of five years. Assume all criteria for the recognition of the dismantling provision has been met and that it is not used to produce inventories. A fair discount rate of 10% per annum (pre-tax) is applicable. The plant has no residual value and Metsi Limited uses the straight-line method to calculate depreciation. Calculate the depreciation expense recognised in the current financial year ending 31 December 2019. a. R350 000 b. R300 000 c. R331 046 d. R335 318
A vehicle which cost R100 000 and on which the accumulated depreciation is R60 000 on 31 December 2020 (year end) is sold on the 31st March 2021 for R45 000 to Mr Hamilton. It was agreed that he would pay 50% in cash and the balance on the 30th June 2021. Depreciation is written off at 20% per annum using the diminishing balance method. The entity is not registered for VAT. Required: Prepare all the journal entries to record the disposal of the vehicle on the 31st March 2021. Journal narrations are required. Document numbers are not required.
On 1 July 2019 Manila Ltd sold an item of plant to Tokyo Ltd for $600,000 when its carrying value in Manila Ltd book was $800000 (costs $1200,000, accumulated depreciation $400,000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Pass the necessary entry in 30 June 2020 to eliminate the intra-group transfer of equipment
Renata Corporation purchased equipment in 2019 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2021 for $110,000. What is the amount and character of Renata's gain or loss? Renata Corporation has a gain of $ of which $ is treated as ordinary income due to
At the beginning of 2019, PT XYZ purchased an asset for Rp600.000 with an estimated useful life of 5 years and an estimated residual value of Rp50.000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. ABC’s tax rate is 40% for 2019 and all future years. At the end of 2019, which of the following deferred tax accounts and balances is reported on ABC’s statement of financial position?
Jasmin Company purchased an investment property on January 1, 2017 at a cost of P2,200,000. The property has a useful life of 40 years and at December 31, 2019 had a fair value of P3,000,000. On January 1, 2020, the property was sold for net proceeds of P2,900,000. The fair value of the investment property cannot be measured reliably. What is the gain or loss to be recognized in profit or loss for the year ended December 31, 2020 regarding the disposal of the property?
Hauswirth Corporation sold (or exchanged) a warehouse in year 0. Hauswirth bought the warehouse several years ago for $65,000, and it has claimed $23,000 of depreciation expense against the building. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable. Round your final answers to the nearest whole dollar amount.) Required: a. Assuming that Hauswirth receives $50,000 in cash for the warehouse, compute the amount and character of Hauswirth's recognized gain or loss on the sale. b. Assuming that Hauswirth exchanges the warehouse in a like-kind exchange for some land with a fair market value of $50,000, compute Hauswirth's realized gain or loss, recognized gain or loss, deferred gain or loss, and basis in the new land. c. Assuming that Hauswirth receives $20,000 in cash in year O and a $50,000 note receivable that is payable in year 1, compute the amount and character of Hauswirth's gain or loss in year O and in year 1.
On 1st July 2021, Hard Rock Pty Ltd a small construction business purchased two business assets for the purpose of producing assessable income. The aggregated turnover for the business was less than 10 million dollars. Remember that Hard Rock Ltd has chosen not to use the simplified depreciation rules in any years. You are required to analyse the two scenarios and calculate any allowable deductions arising from the decline in value of the following assets. Use all the relevant methods to show the difference in the claimable amount.   Asset1: An excavator was purchased at the beginning of the year at the cost of $125,000. The estimated life of this asset is 12 years.  Asset2: A luxury car on 1st July at the cost of $92,000. The estimated life of the vehicle is eight years.  Required: a) How would the business decision choose a method of depreciation for the following two situations? b) What considerations a taxpayer should take in choosing a particular method of depreciation?
Asap Cullumber Company owns delivery equipment that cost $53,800 and has accumulated depreciation of $27,300 as of July 30, 2020. On that date, Cullumber disposes of this equipment. For parts b - d below, enter D for debit or C for credit in the first box and the amount in the second box. What is the net book value of the equipment on July 30, 2020? Assume Cullumber scraps the equipment as having no value on July 30. What is the gain or loss, if any, that Cullumber should recognize? Assume Cullumber sells the equipment for $37,200 cash on July 30. What is the gain or loss, if any, that Cullumber should recognize? Assume Cullumber sells the equipment for $18,000 cash on July 30. What is the gain or loss, if any, that Cullumber should recognize?