Answer:
R is a better alternative because it has a higher NPV than Q.
Explanation:
Machines Q R
First costs $380,000 $395,000
Net annual revenue $150,000 in year 1, $152,500
increasing by $500
per year thereafter
Salvage value $4,000 0
Life, years 8 10
MACRS 7 year recovery:
year % Q R
1 14.29% 54,302 56,445.50
2 24.49% 93,062 96,735.50
3 17.49% 66,462 69,085.50
4 12.49% 47,462 49,335.50
5 8.93% 33,934 35,273.50
6 8.92% 33,896 35,234.00
7 8.93% 33,934 35,273.50
8 4.46% 16,948 17,617.00
net cash flow
year Q R
1 116,505.70 118,880.93
2 130,396.70 132,982.43
3 121,411.70 123,304.93
4 115,086.70 116,392.43
5 110,676.90 111,470.73
6 110,930.10 111,456.90
7 111,326.90 111,470.73
8 108,306.80 105,290.95
9 99,125
10 99,125
Using a financial calculator, I calculated the NPV using a 12% discount rate:
- Q's NPV = $200,636.15
- R's NPV = $259,221.01
The correct answer would be 81
Answer:
$143,750
Explanation:
We have to first calculate the present value of the bargain purchase option:
PV = $200,000 / (1 + 6%)⁵ = $149,451.63
net lease amount = $790,000 - $149,452 = $640,548
PVIF Annuity due, 6%, 5 payments = 4.546
Annual payment = $640,548 / 4.456 = $143,750
Answer:
The refund claimed should be shown as a benefit due to loss carryback in 2018.
Explanation:
Since Tanner, Inc. incurred a financial and taxable loss for 2018. and decided to use the carryback provisions as it had been profitable up to this year, the amounts related to the carryback should be reported in the 2018 financial statements as a benefit due.
Tax loss carryback is when a corporation <u>retrospectively adjusts its tax returns for prior periods</u> if it incurs a net operating loss (NOL) in current period.
The loss carryback <u>generates a tax refund</u> for the business because it reduces previous year tax liability. After the carried back loss is applied, it will be <u>as though the business overpaid taxes the previous year; which will now be shown as a benefit in the current year</u>
