Describe the methods that are allowed to be used in accounting for the Investment Tax Credit.
What will be an ideal response?
ANSWER:
Either flow through or allocation is allowed in accounting for the Investment Tax Credit. Under the flow through method, benefits are immediately recognized in the year the asset is acquired. There are two allocation methods available. The first method leaves tax expense unaffected by the ITC and reduces the cost of the affected assets by these amounts. The second allocation method sets up a deferred investment credit account and writes if off over the life of the affected assets by means of reducing income tax expense. This deferred credit account is neither a liability nor an owner’s equity account. It has only a contingent liability aspect which arises because of the ITC recapture provision if the asset is disposed of prior to the full holding period.
You might also like to view...
The success of accounting as a form of communication depends on two concepts,___________and ____________________
Fill in the blank(s) with correct word
Sales Returns and Allowances is a contra-asset account
a. True b. False Indicate whether the statement is true or false
Kenilworth Inc. is shifting from its rented four-room office to a standalone office building owned by the company itself. This can be classified as a ________
A) modified rebuy B) regular buy C) straight rebuy D) new rebuy E) new task
Form W-4 is completed by the employer for each non-exempt employee
Indicate whether the statement is true or false