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Terms in this set (12)
there are a number of _____________________ characteristically used by government entities to _________________________.
stimulate an economy
Tax deduction serves to _________________________
reduce taxable income
Tax credit serves to ___________________________
reduces the actual amount of taxes owed on a dollar-for-dollar basis
Federal and state government bodies use tax credits to incentivize businesses to increase their investments in certain __________________, ________________, and _________________.
geographies, industries, and technologies.
Two ways a company can account for an investment tax credit:
-Flow Through/Tax Reduction Method
-Deferral/Cost Reduction Method
When is the Flow Through/Tax Reduction Method?
tax credits are related to expenses/non-asset purchase
the tax credit will be applied and documented on the Income Statement in the same year that the ______________________
An investment tax credit can be recognized either by directly reducing _____________________________ or by providing an ________________________________.
-income tax expense
-offset to the accounting expense that provided the credit.
When is the Deferral/Cost Reduction Method used?
when the company purchased an asset
In regards to the Deferral/Cost Reduction Method, the ___________________ over the same accounting periods as the ___________________.
credit is amortized
asset is depreciated
In regards to the Deferral/Cost Reduction Method, the company can:
-deduct the credit from the asset base and calculate the depreciation expense on the net amount.
-can amortize the tax credit over the asset's serviceable life.
A tax credit is designed as an ________________________ and can reduce a company's ___________________________
-immediate source of cash
-reduce current and future year's federal and state tax liabilities.
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