Principles of Deductions Flashcards
1
Q
Book value or Carrying value is referred to as ___?
A
Adjusted Tax Basis
Book value @ end of the useful life=salvage value
2
Q
Declining balance method
A
Declining balance= straight line rate x 150%
Double declining balance=straight line rate x 200%
3
Q
Disposal of destroyed properties
A
Book value is recognized as an ordinary loss.
4
Q
Intangible assets
A
Expensed over their legal life or expected usage life whichever is LOWER.
5
Q
Franchise of public utility vehicles are not amortized. Why?
A
They are intangible assets that do not lose their value over time.
6
Q
Business expense=deductible against GI in the current period
A
Salaries and wages expense Utilities expense Selling expense Rent (deliveey and commission expense) Local taxes and permits
7
Q
Capital expenditures= not deducted to GI in current period, deducted in the future period when used.
A
- Items of PPE(straight line, sum of the years, double declining)
- Inventory
- Investment
- Prepayment
- Acquisition of intangibles + cost of defending in the court
- Expenses to promote business goodwill
- Rentals on capital/finance lease that transfers OWNERSHIP
