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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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drek231 [11]

A firm will work with a customer to design the product, and then make it from purchased materials, parts, and components. this firm is called <u>a make order firm.</u>

<u />

A firm is a for-profit business, generally formed as a partnership that provides professional services, along with criminal or accounting offerings. The theory of the firm posits that firms exist to maximize profits.  The term firm is synonymous with enterprise or organization. firms can operate beneath several distinct structures, including sole proprietorships and corporations.

In income, commerce, and economics, a customer is a recipient of a good, service, product, or idea - obtained from a seller, vendor, or supplier via a monetary transaction or change for money or some other valuable consideration.

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8 0
2 years ago
A single server model with infinite calling population, first-come, first-served queue discipline, Poisson arrival rate and expo
Elden [556K]

Answer:

3.5 customers

Explanation:

The computation of the average number of customers in the system is shown below:

= (Arrival rate) ÷ (Service rate - arrival rate)

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=  (210 customers) ÷ (60 customer)

= 3.5 customers

We simply apply the average number of customers formula so that the correct value can come

All other information which is given is not relevant. Hence, ignored it

3 0
3 years ago
What is a trade-off?
mojhsa [17]
The best answer is:
C) <span>a choice that must be made due to scarcity.
A tradeoff occurs when you must choose between two or more things, selecting the best option given the constraints. Choosing what to spend your allowance on, for example, is involves a trade-off that you must make due to the scarcity of your allowance money (you don't have unlimited money). D is a tempting answer, but it does not define trade-off as well as C. </span>
3 0
3 years ago
For each of the following examples, explain whether it is a case of external or internal economies of scale:
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Whether it is a case of external or internal economies of scale:

A. A number of firms doing contract research for the drug industry are concentrated

Larger changes within the industry lead to external economies of scale, so as the industry expands, the average cost of doing business decreases.

when external economies of scale exist?

External economies of scale take place when an industry as a whole expands and businesses profit from lower long-term average costs. External economies of scale are also known as advantageous external outcomes of industrial development.

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brainly.com/question/20354469

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8 0
1 year ago
Yeloe Corporation sells 400 shares of common stock being held as an investment. The shares were acquired six months ago at a cos
guajiro [1.7K]

Answer:

a.

Explanation:

Cash (400*40)              Dr.$16,000

Loss on sale of stock investments (400*40-400*600  Dr.$8,000

Stock Investments  (400*60)                                          Cr.$24,000

As the stock was sold $20 below its purchase price therefore $20*400 will be recorded as loss on investments.The loss on investments and Cash will be debited and investments have decreased therefore credited.

6 0
3 years ago
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