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ADMS 3520 Chapter Notes - Chapter 5: Capital Cost Allowance, Goods And Services Tax (Australia), Capital Asset

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School
York University
Department
Administrative Studies
Course
ADMS 3520
Professor
Thaddeus Hwong

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Document Summary

Main points: section 18(1) of the income tax act lays down general limitations as regards the deductibility of the expenditure for computing the business income. This also includes limitation on deduction of the capital cost: section 20(1) lays down that no part of the capital cost is deductible except the cca as laid down in the regulation. Part xi of itr along with the schedules ii through vi lays down how to compute cca: tax and accounting terms compared. Undepreciated capital cost (ucc) net book value: there are difference between the accounting and the tax treatment with respect to the acquisitions, dispositions and amortization. Accounting-in accounting gaap"s are followed with respect to the booking of the acquisition cost which includes the cost originally paid for bringing the asset to its present condition or location. Tax-more or less the same principle is followed except for the fact that the assets are grouped as a class, e. g. class 8 for furniture.

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Related Questions

Using the data in the Option 2 Spreadsheet(linked at the bottom of the page), perform the accounting requiredfor the acquisition of Little, Inc. by Big, Inc. This is an 80%acquisition, where the book value of the assets acquired is lessthan the acquisition price. Within the worksheet, you are to:

1. Select an accounting method (either cost or equity) andexplain why you selected this method

2. Perform the required journal entries

3. Complete the consolidation worksheet

4. Prepare the consolidated balance sheet in good form

Big CompanyBalance Sheet Which accountingmethod is most appropriate for representing an investment of thistype? Prepare Elimination Entriesfor Stock Acquisition
Assets, Liabilities & Equities Book Value Account DR CR
Cash $2,100,000
AR $10,000
Inventory $200,000
Land $40,000
PP&E $400,000
Accumulated Depreciation -$150,000
Patent $0
Total Assets $2,600,000 Prepare thejournal entries for a 80% Asset Acquisition (using Big CompanyCash)
AP $100,000
Common Stock ($10 par) $450,000 Account DR CR
Additional Paid In Capital $600,000
Retained Earnings $1,450,000
Total Liabilities &Equity $2,600,000 Prepare thejournal entries for a 80% Acquisition by issuing 10,000 shares ofBig Company Stock Big Company Balance Sheet (Consolidated)
Little Company BalanceSheet Assets, Liabilities & Equities
Assets, Liabilities & Equities Book Value Account DR CR Cash
Cash $35,000 Investment in Little AR
AR $10,000 Common Stock Inventory
Inventory $65,000 Additional Paid In Capital Land
Land $40,000 Allocation of Excess Schedule PP&E (net)
PP&E $400,000 Accumulated Depreciation
Accumulated Depreciation -$150,000 Goodwill
Patent $0 Patent
Total Assets $400,000 Total Assets
AP $100,000 AP
Common Stock $100,000 Common Stock ($10 par)
Additional Paid In Capital $50,000 Additional Paid In Capital
Retained Earnings $150,000 Retained Earnings
Total Liabilities &Equity $400,000 NCI
Total Liabilities & Equity
Assumethat all noncash assets have a Fair Value that is 10% greater thanBook Value

What accounting methods are allowed by GAAP accounting tocombine the books of two companies combining either through anacquisition or a merger?

How is an acquisition different from a merger?

please explain and show detailed calculations

CCA and UCC. Trinity Corp. purchased a private jet for $200,000 for the use of its senior managers. The jet falls in CCA Class 9, with a 25 percent rate. Calculate the annual capital cost allowance (CCA) and end-of-the-year book value (UCC) for this equipment for the first seven years.