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Chapt - 9 Losses

Chapt - 9 Losses

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Published by: humnarvios on Jan 28, 2012
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INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS
Chapter 9: Losses
CHAPTER 9
LOSSES
Problem 9 – 1 TRUE OR FALSE
1.False – Capital loss2.False – not deductible3.False – lower amount of the replacement cost or book value4.True5.True6.False – Deductible from gambling gains only.7.True8.True9.True10.False – Not deductible because the property has been sold.11.True12.True13.True14.False – deductible only to either income or estate15.False – NOLCO is not applicable when OSD is used.16.False – NOLCO is not applicable under MCIT.
Problem 9 – 2
1. C5. D9. A2. C6. A10. C3. D7. D, P10,000 only11. B4. C8. A12. C
Problem 9 3 B
Loss from sale of business equipmentP100,000
Problem 9 4 A
Loss on sale of capital assets is not deductible from business income.
Problem 9 5 C
Deductible loss Book value (P100,000 x 10% x 4)P 40,000
Problem 9 6 D
Deductible loss book value lower than replacement costP 50,000
Problem 9 7 D
Net operating loss per GAAPP 50,000Less: Bad debts estimate 10,000NOLCO in the succeeding yearsP 40,000
Problem 9 8 D
Zero. An individual who claims the 10% optional standard deduction shall not simultaneouslyclaim deduction of the NOLCO.
Problem 9 – 9
P25,000. The lower between the carrying value and replacement cost.
62
 
INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS
Chapter 9: Losses
Problem 9 – 10
Book value (P1,200,000) x10/20P600,000Less: Insurance recoveryP200,000Scrap recovered20,000 220,000Deductible lossP380,000
Problem 9 – 11
None, because the demolition cost, net of amount realized from scrap should be capitalizedas part of the factory building cost.
Problem 9 – 12
No deductible loss at balance sheet date. On June 30, the reportable gain would be P10,000,(110,000 – 100,000).
Problem 9 – 13
Net loss reportedP 50,000Estimated bad debts( 20,000)Warranty expense( 10,000)Net loss carry-overP 20,000
Problem 9 – 14
Gross profit year 1P500,000Less: Other operating expenses 580,000NOLCO for year 2P 80,000
Problem 9 – 15
 Year 1 Year 2SaleP1,800,000Less: Cost Notes receivable 1,500,000Gain P 300,000No gain or loss on year 1 because there was no actual sale of foreclosed property.
Problem 9 – 16
None, because the floss should be recognized only upon actual sale of the propertyforeclosed.
Problem 9 – 17
None. Gambling losses can only be deducted from the gambling winnings. Gamblingtransactions is not an ordinary business transactions, but a capital asset transaction.Accordingly, gambling losses is not an allowable deduction from ordinary gross income.
Problem 9 – 18
Compensatory liquidated damagesP 50,000Loss on robbery (construction supplies)50,000Loss on pilferage of business supplies10,000Replacement cost of damaged portion of machine 150,000Deductible lossP260,000
Problem 9 – 19
1.OSD (P2,000,000 x 40%)P800,0002.OSD (P2,000,000 P500,000) x 40%P600,000
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