2. [5] Some data for a company\'s operation during the year 2004 is shown in the

ID: 2541660 • Letter: 2

Question

2. [5] Some data for a company's operation during the year 2004 is shown in the table below. Determine which of these items directly affect taxable income (TI) for 2004. Also, indicate which items reflect cash flow transactions in the year 2004. [Do not compute taxable income or cash flow after tax. Amounts are in 000's Answers Answers Reflect Cash Flow Affect Tax Inc. in 2004? Transaction in 2004? Yes or No Item Revenues from Operations Labor Expenses Materials Expenses Import Taxes on Imported Products Real Estate Taxes Depreciation Expenses Bribes to Foreign Government Officials 262 Sales of Old Asset w/ Zero Book Value 120 Proceeds from Loan Amount Loan Interest Payment on Old Loan Loan Principal Payment on Old Loan Yes or No Data 25,000 2,000 7,000 500 400 1,800 3,000 135 245

Explanation / Answer

Answers

Items

Affect Tax Inc in 2004 ?

Reflect cashflow transaction in 2004 ?

Revenue from operation

Yes

Labour Expenses

Yes

Material Expenses

Yes

Import taxes on Imported products

Yes

Real Estate Taxes

Yes

Depreciation Expenses

Yes

Bribe to foreign Govt officials

Yes

Sale of old assets with zero book value

Yes

Proceeds from loan amount

Yes

Loan interest payment on old loans

Yes

Loan Principal payment on old loans

Yes