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mash [69]
3 years ago
12

Western Bank & Trust purchased land and a building for the lump sum of $3 million dollars. To get the maximum tax deduction,

Western allocated 90% of the purchase price to the building and only 10% to the land. A more realistic allocation would have been 70% to the building and 30% to the land.
Explain the tax advantage of allocating too much to the building and too little to the land.

Was Western's allocation ethical? If so, state why. If not, state why not. Identify who was harmed.
Business
1 answer:
leonid [27]3 years ago
3 0

Answer:

Explanation:

Because land never depreciates, Western Bank & Trust wanted to distribute a higher percentage of the purchase price to the building, rather than the land. By allocating 90% of the purchase price to the building, rather than a more accurate 70%, Western Bank & Trust increases the depreciation amount of the building each year. For tax purposes, the IRS requires that the Modified Accelerated Cost Recovery System (MACRS) be used as the depreciation method used by companies. Under this method, the IRS specifies the useful life for a specific asset. MACRS also ignores residual value of an asset at the end of its useful life. By stating that the building was worth 90% of the total purchase price, Western Bank is attempting to increase its tax deduction from the IRS, because only the building depreciates, not the land. This improper allocation of the total purchase amount violates GAAP principles, which require that accounting information be “relevant and have faithful representation.” The information must be “complete, neutral, and free from error” (Nobles, Mattison, & Matsumura, 2014). For Western Bank to provide complete, neutral, and free from error information, it should record the transaction honestly: 70% to the building, 30% to the land. This dishonest representation is harmful to the federal government in that it is allowing Western Bank to take more money than what it is owed. If these kinds of situations happen on a large scale, it could have a huge impact on the economy in general. Source: Nobles, T., Mattison, B., & Matsumura, E. M. (2014). Horngren's Accounting, 10th Edition. Pearson Education, Inc. Student 2

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Levart [38]

Answer:

To create human capital in a company, it is mainly necessary to capture it (recruit and select it) and retain it (make it stay in the organization).

Explanation:

First, to be able to recruit competitively, the organization has to work its corporate brand.

Secondly, there must be efficient and current recruitment processes. Recruitment is the process of attracting talent to the selection processes.

Once the worker is incorporated into the company, strategies must be used to improve talent retention and team performance.

5 0
3 years ago
Consider Country (Z) with a GDP level of 210,000 and a growth rate of 5% in 2019 (i.e. calculated at the end of year 2019). The
Natasha2012 [34]

Answer:

Country (Z) GDP Growth:

a) The GDP will double in:

2019 - 2022 = 3 years

2022 - 2025 = 3 years

2025 to 20 years as determined below

Total = 26 years

The GDP will double in 26 years.

b) The growth rate from 2025 and so on at 1% will approach 27.62% based on the 2019 GDP.  The approach used is to determine the difference between the after 2025 GDP and the 2019 GDP.  This difference (growth in absolute terms) is divided by the 2019 GDP, and then multiplied by 100 to obtain the rate.

c) If the growth rate of 5% is sustained, it will take the GDP 15 years to double:

420,000 = G₀(1 + g)ⁿ

420,000 = 210,000 (1 + 5%)ⁿ

Solving for n with an online calculator,

n = 15 years

Check:

210,000 x 2.079

= 436,590

= 437,000 approx.

As a number of years = 15 years

As a fraction of part a answer = 15/26 = 57.69%

Explanation:

a) 2019 Country Z's GDP = 210,000

2019  - 2022 Growth rate = 5%

Future growth rates:

2022- 2025 = 3%

2025 - so on = 1%

Let Country (Z's) GDP in 2019 = G₀ which is equal to 210,000

n = number of years from 2019 to 2022, 2022 to 2025, and so on.

g = growth rate = 5% for the period 2019 to 2022

Gⁿ = GDP in n years at given rates

Gⁿ = G₀(1 + g)ⁿ

(1 + g)ⁿ = increase in GDP as a result of the growth rate and number of years

b) With GDP growth of 5% from 2019 to 2022, the GDP will be

= 210,000 (1 + 5%)³

= 210,000 x 1.158

= 243,000 approx.

c) From 2022 to 2025 at 3%, the GDP will be

= 243,000 (1 + 3%)³

= 243,000 x 1.093

= 265,600

For GDP to double the 2019 GDP with 3% growth = 420,000 (210,000 x 2) or more

GDP = Gⁿ = G₀(1 + g)ⁿ

420,000 = 243,000 (1 + 3%)ⁿ

solving for n with an online calculator,

n = 20

Check:

= 243,000 (1 + 3%)∧20

= 243,000 x 1.817

= 441,531

= 442,000

4 0
3 years ago
It is August 14th and John has just purchased 100 shares of Cash Cow Inc. for​ $1,200 with a settlement date of August 16th. Cas
sattari [20]

Answer:

A. John paid $0.00 for the dividend because he was not the shareholder of record on August 15th. Therefore, the dividend payment went to the previous owner of the stock.

Explanation:

Settlement date is the date on which ownership of share transfer to buyer of stock, it is normally two days after trade date.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

4 0
3 years ago
An insurance annuity offers to pay you $1,000 per quarter for 20 years. If you want to earn a rate of return of 6.5 percent, com
bekas [8.4K]

Answer:

the amount that willing to pay is $44,591.11

Explanation:

The computation of the amount that willing to pay is as follows:

The Present Value of an Ordinary Annuity is

= Amount × [{1 - (1 ÷ (1 + rate of interest)^n} ÷ rate of interest]

= $1,000 × [{1 - (1 / (1 + 0.065 ÷ 4)^100} ÷ 0.065 ÷ 4]

= $44,591.11

Hence, the amount that willing to pay is $44,591.11

We simply applied the above formula so that the correct value could come

And, the same is to be considered

8 0
3 years ago
In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must
Simora [160]

Answer:

a. Y/N×N/POP.

Explanation:

Given that

Y = Real GDP

POP = Total population

N = Number of employed workers

By considering the above information, we have to find out the real GDP per person or real GDP per capita which equal to

Real GDP per person = (Real GDP) ÷ (Total population)

We simply divide the real GDP by the total population so that real GDP per capita could arrive.

3 0
3 years ago
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