A disadvantage of the corporate form of business ownership is that:

The correct answer is d). We have that government spending can also give way to products and services, just like private enterprises, thus there is no double-counting there. Services such as haircuts have their own value, which are separate from any other material products. Finally exports are also not counted twice; Raw materials though would be counted twice if we counted them for the GDP since their value is incorporated in the value of the final product. For example, we cannot count towards the GDP the value of rubber production in a country since then, if we counted the value of the tires too, we would count the value of the rubber in the tires twice (one time as rubber/ one time as part of the tire).

7 0

3 years ago

Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses. Year 1$(12,000)Net Section 1

vekshin1

Answer:

a. $0 will be reported as capital gain, while $7,500 will be reported as ordinary gain.

b. $1,000 will be reported as capital gain, while $8,000 will be reported as ordinary gain.

Explanation:

Note: This question is not complete as part 'a' of the requirement is omitted. The complete question with the part 'a' of the requirement is therefore provided before answering the question as follows:

Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses.

Year 1 $ (12,000) Net Section 1231 loss

Year 2 10,500 Net Section 1231 gain

Year 3 (14,000) Net Section 1231 loss

a. In year 4, Roof sold one asset and recognized a $7,500 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

b. In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

Explanation of the answer is now provided as follows:

When section 1231 losses exceed section 1231 profits in the prior five years, the excess loss (unapplied loss) is applied against the current year's section 1231 gain.

The amount that is reported as ordinary income is the amount of the loss that is applied against the current year's section 1231 gain.

Long-term capital gain is the excess of the current year's section 1231 gain over the the recaptured section 1231 loss from the prior five years.

You have to start with the earliest year to apply section 1231 losses from the previous five years to the current year's section 1231 gain.

Therefore, we have:

a. In year 4, Roof sold one asset and recognized a $7,500 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

As a result of the loss from the previous year that is applied to the extent of $7,500, the whole of the $7,500 net Section 1231 gain will be recorded as ordinary gain.

Therefore, $0 will be reported as capital gain, while $7,500 will be reported as ordinary gain.

b. In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

Unapplied losses in previous years can be calculated as follows:

Details Amount ($)

Net Section 1231 loss in Year 3 (14,000)

Net Section 1231 gain in Year 4 7,500

Net Section 1231 loss in Year 1 (12,000)

Net Section 1231 gain in Year 2 10,500

Unapplied losses in previous years  (8,000) 

Because there are unapplied losses of $8,000 from previous years, $8,000 will be reported as ordinary gain.

Therefore, the amount to be reported as capital gain can be calculated as follows:

Amount to be reported as capital gain = Gain in Year 5 – Amount to be reported as ordinary gain = $9,000 - $8,000 = $1,000

Therefore, $1,000 will be reported as capital gain, while $8,000 will be reported as ordinary gain.

8 0

3 years ago

Martinez, Inc. acquired a patent on January 1, 2017 for $41,800 cash. The patent was estimated to have a useful life of 10 years

salantis [7]

Answer:

Martinez, Inc. acquired a patent on January 1, 2017 for $41,800 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 6 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $26,800. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Required:

a. Prepare the journal entry to record the acquisition of the patent on January 1, 2017.

b. Prepare the journal entry to record the annual amortization for 2017.

c. Compute the amount of amortization that would be recorded in 2018. (Round your final answer to the nearest whole dollar.)

d. Determine the gain (loss) on sale on June 30, 2019. (Round your intermediate calculations and final answer to the nearest whole dollar.)

e. Prepare the journal entry to record the sale of the patent on June 30, 2019. (Round your intermediate calculations and final answer to the nearest whole dollar.)

a) Journal Entry to record acquisition of patent:

January 1, 2017:

Debit Patent Account with $41,800

Credit Cash Account with $41,800

Being acquisition of patent with cash

b. Prepare the journal entry to record the annual amortization for 2017.

Annual amortization = $41,800/10 years = $4,180

Journal entry to record the annual amortization for 2017:

December 31, 2017

Debit Amortization Expenses with $4,180

Credit Accumulated Patent Amortization with $4,180

Being 2017 amortization expense.

c. Compute the amount of amortization that would be recorded in 2018. (Round your final answer to the nearest whole dollar.)

New amortization for 2018 would be ($41,800 - $4,180) /6 years = $6,270

d. Determine the gain (loss) on sale on June 30, 2019. (Round your intermediate calculations and final answer to the nearest whole dollar.)

Loss on sale on June 30, 2019:

Patent Account minus accumulated amortization to date

2019 Amortization up to June 30, 2019 = $6,270/2 = $3,135

Accumulated amortization = 2017 + 2018 + 2019 amortizations

= $(4,180 + 6,270 + 3,135) = $13,585

Patent Book Value = $41,800 -$13,585 = $28,215

Loss on sale = Sales minus book value = $(26,800 - 28,215) = ($1,415)

e. Prepare the journal entry to record the sale of the patent on June 30, 2019. (Round your intermediate calculations and final answer to the nearest whole dollar.)

Journal entries to record the sale of the patent on June 30, 2019:

June 30, 2019:

Debit Cash with $26,800

Debit Loss on Sale with $1,415

Credit Patent Account with $ $28,215

Being cash and loss realized on sale of patent.

Debit Amortization with $3,135

Credit Accumulated Amortization with $3,135

Being amortization expense for 6 months.

Debit Accumulated Amortization with $13,585

Credit Patent Account with $13,585

Being entries to close the accounts.

Explanation:

Amortization is the depreciation term for intangible assets. While tangible assets are depreciated over their useful life, intangible assets are amortized.

The essence is to match revenue over the periods for which the cost was incurred in accordance with GAAP.

Similar treatments are given to amortization like depreciation, including annual expensing, accumulation, and loss and gain on sale or retirement of the intangible.

5 0

3 years ago