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