...SCHOOL OF ACCOUNTANCY UNIVERSITI UTARA MALAYSIA BKAT 2013 – PRINCIPLES OF TAXATION TUTORIAL 3 – UNEARNED INCOME QUESTION 1 Under what circumstances income derived from rental of properties is taxable under Section 4(a) – Business Income instead of under Section 4 (d) – Investment income? QUESTION 2 (A) Mr. Rozmi has opted to retire from MR Resources Sdn Bhd in 2011. In 2012, he reported the following with regards to his income: Pension - optional retirement | 3,000 | Annuity paid by Bening Insurance Bhd, a Malaysian life insurer | 9,000 | Malaysian dividend, net | 14,400 | Royalties from musical composition | 23,000 | Interest on fixed deposits with Maybank for 15 months' tenure | 16,000 | Mr Rozmi owns a service apartment, which is let out for rent. The statement of income and expenditure for the year ended 31 December 2001 is as follows: Rent received | | | 26,300 | Less: Expenses | | | | Mortgage loan interest | 14,400 | | | Quit rent | 300 | | | Assessment and rates | 150 | | | Cost of tiling the cement floor of the balcony | 1,200 | | (16,050) | Net rental income | | | 10,250 | The accumulated rental loss brought forward from the previous year was RM2,800. REQUIRED: Computed the aggregate income for Mr Rozi for the year assessment 2012 (B) Mr Ramli and his wife jointly owned a condominium that had been let for rent since 2006. The statement of rental income and expenditure is as follows: Rent received: | |...
Words: 465 - Pages: 2
...Good opinion piece. The way the medallions turned into a highly sought after legal tender needs scrutiny. When the owners started leasing cabs by the flat fee for a shift, then the medallions became bullet-proof money makers: No matter how slow the business was, the owners made out. When Boston Cab Company used a paid-mileage system, where the initial lease fee was less than $10/shift (about 45 cents /mile) and gas-ups on the garage dime, then the drivers were not ever placed in that serf-like scenario. I know this, because I drove under both scenarios in the very early 1980's....part of that time (2 years) as a "company" driver using their paid-mileage system, the other part as a driver of an "independent" cab that operated under the "association" (meaning painted like a Boston Cab..brown/white, with the same radio dispatch system). When I drove for the "company" (Then owned/operated by the Barenholtz brothers), I was never discriminated against, though I will say that the "window of shame" behavior was about 50 times worse than that depicted by the TV show "TAXI", with absolutely no humor involved. When I drove for an independent, then I had extreme mobility, but I had to pay a $40/shift fee and fill the cab with gas. It could be a tough nut to crack (about $50) on a daily basis at that time, but I preferred it. What seems to have happened now is that the leases are just too expensive for the drivers in relation to the fare structure and the cost-of-living. When I drove in the...
Words: 389 - Pages: 2
...Introduction | | Throughout this course, as well as in FI515, we haveassumed that firms own fixed assets and report them on their balance sheets. However, since it is the productive use of assets that is important and not necessarily the form of ownership, we'll spend some time this week looking at leasing as an alternative to buying. This alternative way of obtaining the use of equipment and facilities is currently available for virtually any kind of fixed assets, with over 30% of all new capital equipment being currently financed through lease arrangements. Lease transactions involve two parties: the lessor, who owns the property, and the lessee, who gains the right to use of the property in exchange for one or more lease, or rental, payments. | | Types of Leases | | In chapter 19, you will find a description of the five most important types of leasing arrangements, which include 1. operating lease, 2. financial, or capital, lease, 3. sale-and-leaseback arrangement, 4. combination lease, and 5. synthetic lease. Please keep an eye on the so called "synthetic" leases, which are still subject to a great deal of controversy after their "creative" use by such corporate names as Tyco and Enron. | | Tax Effects | | The full amount of the lease payments is a tax-deductible expense for the lessee for as long as the IRS agrees that a particular contract is a genuine lease and not just a loan called a lease. This makes it important that...
Words: 889 - Pages: 4
...DIRECTOR OF LEASING JOB DESCRIPTION The Director of Leasing, to the President. The Director of Leasing will be responsible for the leasing, marketing and overall relationships for all of our tenancy and oversee the management of all real estate holdings for our organization and related companies. While initially focusing on the three main areas of responsibility below, we look forward to developing this description with the successful candidate to better define the duties going forward. |LEASING: | |Responsible for leasing, renewing leases, lease interpretation and analysis and coordinating documentation flow for all leasing | |activities. | |Negotiate and draft leases; lease addendum and modifications; other documents as required for our portfolio of commercial properties. | |Keep ownership updated on current status of leases, including terms of leases and process of approving any new lease terms. | |Process and administer all lease contracts. | |TENANT RELATIONS: | |Provide...
Words: 251 - Pages: 2
...purchase items or lease items, as an individual and in the business world. If you purchase an item at the wrong time, it could easily put a company as risk for financial hard times. The following will detail some important factors to review when purchasing or leasing is an option. The Differences between Leasing and Purchasing Both leasing and purchasing has its pros and it cons. The trick is to figure out which would be better for a company’s current financial status. Leasing allows a lessee to avoid large down payments, keep updated materials, lower lease payments due to shared tax advantages, and the property that is being leased does not show as an asset or liability. These are all positive factors if your company is a smaller company and does not have the cash to purchase the material or only needs the material for a limited time. Next are a few pros of purchasing through a capital lease. Leasing payments on an operational lease might be higher than those payments on a capital lease due to interest rates and since the company does not own the property, it must not be abused or used to harshly because it will be returned to the lessor. A capital lease gives you tax breaks such as deprecation, while operational leasing does not. As stated above, operational leases (rental agreements) and capital leases (purchasing leases) both have their pros and cons. Again, it is really the current financial status of the company that would determine which method would be best. Financial...
Words: 1043 - Pages: 5
...To: Audit Supervisor From: nigel Date: April 1, 2001 Subject: Accounting for Lease Agreement with HasSpace Inc. In response to your request for accounting guidance regarding the lease agreement with HasSpace Inc, we will address your main questions concerning how the to account for the following: (1) depreciation (if applicable) and expenditures of leasehold improvements, (2) possible general repair and maintenance costs , and (3) the possible re-instation to the property’s original condition. From the information you have provided, the lease agreement has a duration of 10 years and qualifies as an operating lease in accordance with ASC 840, because there is not an option to renew nor has the ability to negotiate for renewal provided in the lease agreement. Our company has placed into service various leasehold improvements (e.g., temporary walls, HVAC, carpeting) that have economic useful lives of 12 years. The lease agreement contains certain provisions that may require our company to perform general repairs and maintenance on the leased premises, and our company may be required to remove all leasehold improvements such that the premise is reinstated to original condition. Our company’s leasehold improvements will be capitalized and depreciated over their useful lives. The leasehold improvements have an economic life of 12 years, while the term of the operating lease is only 10 years. ASC 840-10-35-6 states that...
Words: 312 - Pages: 2
...operating expense on financial statements, and they do not show up as capital of the company. This would be beneficial to them because they are unsure of the length that the current opportunity will last. The Regional Trucking Company fits into this structure of a lease very well. An operating lease is a good choice in this company’s situation. FASB Statement Number 13 states, “Normally, sales-type leases will arise when manufacturers or dealers use leasing as a means of marketing their products.” The Regional Trucking Company that we are consulting for needs an additional twenty trailers; they will not be leasing their own equipment. Hence, a sales-type lease would not be the type of lease they should go with. It would not make any sense because they are not trying to compete in their own business; they are just trying to take advantage of an opportunity that has come along. This is used in capital leasing. The direct financing lease is accounted for the same way as a sales-type lease and it is also used in capital leasing. In a direct financing lease, the lessor is not a manufacturer or dealer in the item, they...
Words: 516 - Pages: 3
...[pic] Credit Application Form |Prepared by FAM (Name): Tarun Makhija |Date Prepared: 18.04.2012 | |BUSINESS INFORMATION | |Existing Customer: Yes No |Phoenix Customer No.: | |Lessee Name: (Full legal name of lessee) |No. of Employees: 500 | |i Media Corp Limited | | |Billing Address: Noida |Business Registration No.: | |Telephone No.: |Fax No.: |Website: | |Business Activities: Media |No. of Years in Business: 50 | |HP Segment: |Type of Business: |Parent Company: (if applicable) ...
Words: 292 - Pages: 2
...Lease Treatment week 3 group: Here is each type of lease, the lease classification for the new truck and how each lease is accounted for: | Capital Lease | Operating Lease | Lease criteria - Ownership | Ownership of the asset might be transferred to the lessee at the end of the lease term. | Ownership is retained by the lessor during and after the lease term. | Lease criteria - Bargain Purchase Option | The lease contains a bargain purchase option to buy the equipment at less than fair market value. | The lease cannot contain a bargain purchase option. | Lease criteria - Term | The lease term equals or exceeds 75% of the asset's estimated useful life | The lease term is less than 75 percent of the estimated economic life of the equipment | Lease criteria - Present Value | The present value of the lease payments equals or exceeds 90% of the total original cost of the equipment. | The present value of lease payments is less than 90 percent of the equipment's fair market value | Risks and Benefits | Transferred to lessee. Lessee pays maintenance, insurance and taxes | Right to use only. Risk and benefits remain with lessor. Lessee pays maintenance costs | Accounting | Lease is considered as asset (leased asset) and liability (lease payments). Payments are shown in Balance sheet | No risk of ownership. Payments are considered as operating expenses and shown in Profit and Loss statement | Tax | Lessee is considered to be the owner of the equipment and therefore...
Words: 330 - Pages: 2
...Abstract This paper attempts to discuss current GAAP treatments of both convertible bonds and redeemable preferred stock. This paper will also demonstrate an example as to how the accounting would change on financial statements in regards to these securities. It takes into account present effects as well as future years; in addition it also considers the conversion of bonds as well as how debt covenant restrictions effect these financials. The paper also documents how both capital and operating leases are accounted for in varying situations. It does not examine criteria for designation between the two, rather how they are handled in regards to common situations. The author adds his own thoughts and provides commentary on these topics and gives consideration to the methodology to which they are accounted for. Alternate Financing Decisions Companies take part in many activities that are recorded in their financial statements. They have sales, expenses, production costs, financing activities, assets & liabilities just to name a few. The inflows and outflows of cash needs to be monitored budgets need to be made and management needs to make important decisions regarding the direction the company is going and how they are going to get there financially. This could end up in the taking out lines of credit, selling assets or looking in to other alternate financing methods such as convertible bonds or the issuance of preferred stock. Baker Company a theoretical company in our text...
Words: 1481 - Pages: 6
...“The Bear Minimum” Case 08-4 Blakely Broom Connor Greco Spencer Craft Big Bear Power, a widely held public utility company, has agreed to a 10-year non-cancelable lease of a combustion turbine from Goliath Co. The lease was signed on December 15, 2010, and begins on January 1, 2011. The lease requires Big Bear to pay $1 million of legal fees incurred by Goliath, and third party legal fees as part of the lease. The lease also states that if a change in control event occurs, Big Bear must purchase the equipment leased from Goliath Co. within 30 days at a price equal to the remaining lease payments. This provision also indicates that a change in control also requires Big Bear to pay a penalty of $500,000. The last provision describes the rental payments, which are directly related to CPI. One of the first issues involved in calculating the present value of the minimal lease payments is figuring out what type of lease this is. This includes figuring out what the present value of the minimum rental payments are, the guaranteed residual value after the lease term ends, penalty for failure to renew or extend, and bargain purchase options, if any. Once we figure this we add the executory costs included in the payments to the minimal lease payments and calculate the present value by using the discount rate. Since this is a non-cancelable lease and it passes the final criterion mentioned in section 840-10-25-1, in that the minimum lease payments exceeds 90% the fair value...
Words: 472 - Pages: 2
...Page |1 Guideline for Assets Ownership “Leased & Owned Properties” for ALJ Land Holding 1. Existing Owned Properties: a. All existing owned properties ownership will be transferred to ALJLH, however lands which will be divested will not be transferred to ALJLH. b. ALJLH will charge the end-user businesses (Tenant) rentals as per market rates with anchor discount, subject to rental growth at 3.5% pa. c. Tatweer-ALJLH will raise project CAPEX budget approval for all renovation and construction works (Project) required by the tenant for the existing owned properties. d. Tatweer-ALJLH will earn a development management fee1 of 5% of the total project construction cost. e. Upon completion of the development work, the total development cost (TDC)2 will be bought by (transferred to) the tenant as a leasehold improvement which will be amortized in their books. f. For the project feasibility process purpose by end-user business, ALJLH will provide TDC only. 2. Existing Leased Properties: a. All existing leased properties contracts will remain under the end-user businesses (Tenant) name as a tenant. b. Tatweer-ALJLH will raise project CAPEX budget approval for all renovation and construction works (Project) required by the tenant. c. Tatweer-ALJLH will earn a development management fee of 5%. d. Upon completion of the development work, the total development cost (TDC) will be bought by (transferred to) the tenant as a leasehold improvement which will be amortized in their books...
Words: 984 - Pages: 4
...Assignment#1 May 20, 2013 Submitted by: Amielah Gabertan Aya Arciaga Bey Cruz Jeuzell Azairah Paul Reyes Name of Business: NEWS TRANSPORT Mission * We will ensure an economical and a hassle-free car rental services by treating our customers as royalties and providing them an exceptional experience that will cater beyond their needs. * We will treat occurring problems as an opportunity for improvement and to the betterment of the business. Vision * NEWS TRANSPORT will rise with other car rental transportation services by committing to excellence and providing unmatched customer service. Marketing Survey Questionnaire (Draft) Name: Check your answers to the following questions. 1. When travelling, what kind of transportation services you use? Please check all that applies * Own car * Bus * Car rentals *If you checked the "car rentals" please proceed to question # 5 2. List all the places you have been to 3. Have you tried renting a car? * Yes * No *If yes, please proceed to question #6 *If no, please proceed to question #4 4. Are you willing to rent a car? * Yes * No *If yes, please proceed to question #7 *If no, what are your reasons? 5. How much are you willing to pay? (Per pax) * 500 - 550 * 600 - 650 * 700 - 750 * 800 and above. 6. What are your usual negative experiences when renting a car? Please specify 7.) Approximately...
Words: 762 - Pages: 4
...Discuss this product or service in terms of its current target market demographics using U.S. Census Data. The product/service I chose is in store movie rental and purchase. I.e. Blockbuster Videos. While DVD sales declined for a third straight year in 2009, consumer appetite for viewing movies at home remains very healthy as new physical and digital services for buying and renting movies gain in popularity. The proliferation of movie rental kiosk machines over the last year was probably the most visible sign of consumer interest in viewing movies at home. To understand the impact of rental kiosks and other movie services on household disc purchasing (DVD and Blu-ray), a survey was fielded to panelists who were identified as disc buyers and asked them to report their movie transactions from channels not tracked by scanning. This included rental transactions (both physical and digital rentals) and downloads. One finding from the study was that average disc purchasing (buy rate) among households who also rented movies on physical DVD or Blu-ray declined in 2009 at a steeper rate compared to the average for all disc buying households. The buy rate among households renting a movie on DVD or Blu-ray declined by -11% in 2009 vs. -7% among all disc buying households. Survey results indicated that 34% of these renting households had rented a movie from a kiosk. In addition, households renting from a kiosk are increasingly turning to kiosks to rent movies with 63% reporting that...
Words: 1471 - Pages: 6
...CHAPTER 21 For a capital lease, the FASB has identified four criteria. 1. Lease transfers ownership of the property to the lessee. 2. Lease contains a bargain-purchase option. 3. Lease term is equal to 75 percent or more of the estimated economic life of the leased property. 4. The present value of the minimum lease payments (excluding executory costs) equals or exceeds 90 percent of the fair value of the leased property. **** Leases that DO NOT meet any of the four criteria are accounted for as Operating Leases. Capitalization Criteria Transfer of Ownership Test Not controversial and easily implemented. Bargain-Purchase Option Test At the inception of the lease, the difference between the option price and the expected fair market value must be large enough to make exercise of the option reasonably assured. Economic Life Test (75% Test) Lease term is generally considered to be the fixed, noncancelable term of the lease. Bargain-renewal option can extend this period. At the inception of the lease, the difference between the renewal rental and the expected fair rental must be great enough to make exercise of the option to renew reasonably assured. Recovery of Investment Test (90% Test) Minimum Lease Payments: Minimum rental payment Guaranteed residual value Penalty for failure to renew or extend the lease Bargain-purchase option Executory Costs: Insurance Maintenance Taxes Exclude from PV of Minimum Lease Payment Calculation ...
Words: 323 - Pages: 2
