DRT Company is a manufacturer of gasoline-powered go-karts and other power products. DRT is a calendar-year,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
DRT Company is a manufacturer of gasoline-powered go-karts and other power products. DRT is a calendar-year, accrual-basis taxpayer. DRT generally files their tax return by the extended due date (9½ months following the close of the tax year). In late December, repre- sentatives of DRT ask for your assistance in determining the appropriate deduction for the current year for 10 different items described in the chart below. DRT is willing to elect the recurring item exception for any item listed, and all amounts are assumed to be material. In addition, DRT also has two specific questions regarding the reporting of intangibles related to (1) the acquisition of a business during the year and (2) the disposition of two intangibles from an acquisition six years ago. Information for these two questions is provided the last two sections of the chart shown below, and may require some research Questionable Item A On November 1 of the current year, DRT paid rent for 20 months in advance for a utility warehouse (a total of $96,000). In addition, DRT paid a $5,000 damage deposit on the property, refundable at the end of the lease if no damage exists. Assume that the amount is material. B In relaying the information on the rental agreement in (1) above, a Vice President at DRT asks if the result would be different if DRT used the cash method of accounting. DRT is considering the acquisition of a services provider that uses the cash method, and they are curious as to how certain items would be handled under a system. Answer for the cash method, based on the facts in (1). C Auditors from the State Tax Commission recently informed DRT that a solvent furnished with their products sold was subject to a special fuel tax under state law. The tax computed on current-year sales is $260,000. DRT paid the $260,000 to the tax Commission on December 15 under protest, and file the necessary paperwork to contest the tax. The case is to be heard in April of next year. Attorneys for DRT estimate their chances of winning at approximately 40 percent. D DRT provides a full six-month warranty for all go-karts sold. Using statistical estimates that have proven fairly reliable in the past, DRT estimates that the warranty expense related to current-year sales is $580,000. As of December 31st of the current year, DRT had incurred $470,000 of actual expenses (parts and labor) related to current-year sales; the remaining warranty work for current- year sales is expected to occur uniformly over the first six months of the next year. DRT accrued the $580,000 as the current-year warranty expense on their financial accounting records. Proposed Deduction by DRT $53,000 $53,000 $260,000 $580,000 DRT Company is a manufacturer of gasoline-powered go-karts and other power products. DRT is a calendar-year, accrual-basis taxpayer. DRT generally files their tax return by the extended due date (9½ months following the close of the tax year). In late December, repre- sentatives of DRT ask for your assistance in determining the appropriate deduction for the current year for 10 different items described in the chart below. DRT is willing to elect the recurring item exception for any item listed, and all amounts are assumed to be material. In addition, DRT also has two specific questions regarding the reporting of intangibles related to (1) the acquisition of a business during the year and (2) the disposition of two intangibles from an acquisition six years ago. Information for these two questions is provided the last two sections of the chart shown below, and may require some research Questionable Item A On November 1 of the current year, DRT paid rent for 20 months in advance for a utility warehouse (a total of $96,000). In addition, DRT paid a $5,000 damage deposit on the property, refundable at the end of the lease if no damage exists. Assume that the amount is material. B In relaying the information on the rental agreement in (1) above, a Vice President at DRT asks if the result would be different if DRT used the cash method of accounting. DRT is considering the acquisition of a services provider that uses the cash method, and they are curious as to how certain items would be handled under a system. Answer for the cash method, based on the facts in (1). C Auditors from the State Tax Commission recently informed DRT that a solvent furnished with their products sold was subject to a special fuel tax under state law. The tax computed on current-year sales is $260,000. DRT paid the $260,000 to the tax Commission on December 15 under protest, and file the necessary paperwork to contest the tax. The case is to be heard in April of next year. Attorneys for DRT estimate their chances of winning at approximately 40 percent. D DRT provides a full six-month warranty for all go-karts sold. Using statistical estimates that have proven fairly reliable in the past, DRT estimates that the warranty expense related to current-year sales is $580,000. As of December 31st of the current year, DRT had incurred $470,000 of actual expenses (parts and labor) related to current-year sales; the remaining warranty work for current- year sales is expected to occur uniformly over the first six months of the next year. DRT accrued the $580,000 as the current-year warranty expense on their financial accounting records. Proposed Deduction by DRT $53,000 $53,000 $260,000 $580,000
Expert Answer:
Answer rating: 100% (QA)
580000 Explanation The deduction for the current year shou... View the full answer
Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-0470477144
5th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
Students also viewed these finance questions
-
The Jordan Corporation is a manufacturer of heavy-duty trucks. Because of a low internal profitability rate and lack of favorable investment opportunities in the existing line of business, Jordan is...
-
The White Tooth Device Company is a manufacturer of high-end electric toothbrushes. For each toothbrush, there are a sequence of assembly steps performed by five workers. Each worker does two tasks....
-
Johnson Company is a manufacturer of very inexpensive DVD players and television sets. The company uses recycled parts and a highly structured manufacturing process to keep costs low so that it can...
-
Find the amplitude, period, and phase shift of function. Graph function. Show at least two periods. 2 3 - cos ( 6)
-
For the list of possible sample means that you produced in Exercise 53. a. Once again show the table and the bar chart for the sampling distribution and comment on the shape of the distribution. b....
-
Can people tell the difference between a female nose and a male nose? This important (?) research question was examined in the article You Can Tell by the Nose: Judging Sex from an Isolated Facial...
-
Review the information on YouTube in this section of the chapter and conduct your own research. What evidence is there that beginning with the end in mind was part of YouTubes founders original plan?
-
For 12 straight weeks you have observed the sales (in number of cases) of canned tomatoes at Mr. Ds supermarket. Each week you kept track of the following: Was a promotional notice placed in all...
-
What do aggregate demand and supply curves look like in Ethiopia (real world)? Provide me the graphical representation to back up AD and AS curves.
-
What are the benefits of businesses? Can a business negatively affect society? Give one example of a business that is benefiting society and one example of a negative effect.
-
Green Products Garden (GPG) Supply sells and distributes a wide range of garden products and equipment including organic fertilizers, premium flower and grass seeds, organic pesticides, and garden...
-
Janet, a student, never liked working on group assignments; however, this time she thought it would be different because she knew most of the people in her group. But it was not long before things...
-
The email just said, Cancel it. Carol Graves couldnt believe her eyes. Carol was a marketing coordinator for Monkland Pharmaceuticals. One of her duties was to organize a professional development...
-
1. What factors do you think contribute to the performance of the employees at DATATRONIC? Refer to Exhibit 5.1 to explain your answer. 2. Consider the needs of the employees at DATATRONIC. What is...
-
HOW MUCH DO YOU GET PAID? Joan had been working as a reporter for a large television network for seven years. She was an experienced and hardworking reporter who had won many awards over the years...
-
Refer to the energy level diagram for Ar+ given in Figure 7.6 and find the spinorbit coupling constant A for the ground state 2P and excited state 4D terms. Predict the wavelength of the transition...
-
The Sweet Times Candy Company has the following equity accounts on its balance sheet: Common stock ($2 par, 510,000 shares) Contributed capital in excess of par Retained earnings Total common...
-
Catalytic hydrogenation of naphthalene over PdC results in rapid addition of 2 moles of H 2 . Propose a structure for this product.
-
Rondeli Corporation is considering investing in a new facility. The estimated cost of the facility is $2,045,000. It will be used for 12 years, then sold for $600,000. The facility will generate...
-
Data for Alameda Inc. are given in E11-7. Instructions Journalize the entries to record the materials and labor variances.
-
Altex Manufacturing purchases $45,000 of raw materials on account, and it incurs $50,000 of factory labor costs. Journalize the two transactions on March 31 assuming the labor costs are not paid...
-
What is the change in velocity of \((a)\) cart 1 (b) cart 2 in Figure 4.6? (c) What do you notice about your two answers? Figure 4.6 Velocity-versus-time graph for two identical carts before and...
-
(a) Are the accelerations of the motions shown in Figure 4.1 constant? (b) For which surface is the acceleration largest in magnitude? Figure 4.1 Velocity-versus-time graph for a wooden block sliding...
-
The \(x\) component of the final velocity of the standard cart in Figure 4.8 is positive. Can you make it negative by adjusting this cart's initial speed while still keeping the half cart initially...
Study smarter with the SolutionInn App