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Is the cash accumulation in an annuity tax free?
No. The interest on a deferred annuity is tax-DEFERRED. That is, it is not taxed until it is distributed, at which point it will be taxed as Ordinary Income. (NO annuity EVER received Capital Gains treatment under current law).
Is depreciation a source of fund?
Some people state that depreciation is a source of funds or a source of cash. I disagree. Depreciation expense is reported as a positive amount on the statement of cash flows prepared under the popular indirect method. However, the reason it is listed is to adjust the net income amount that had been reduced by depreciation expense on the income statement. (Recall that the depreciation entry debits Depreciation Expense and credits Accumulated Depreciation-the cash account is not involved.) In other words, the positive depreciation amount reported on the statement of cash flows is merely one of the adjustments needed to convert the accrual net income to the cash provided from operating activities. Depreciation is not a source of cash. Let's illustrate this with some amounts. A sidewalk florist operates a cash only business. During the most recent year, this florist had cash revenues of $100,000. Its expenses included $70,000 of cash expenses and $8,000 of depreciation expense on its truck that was purchased in an earlier year. During the year there were no other revenues or expenses, and the florist's cash balance increased by $30,000. The florist's income statement will report net income of $22,000 (revenues of $100,000 minus expenses of $78,000). The florist's statement of cash flows prepared under the indirect method will begin with net income of $22,000. It will then add the $8,000 of depreciation expense. The result is cash provided by operating activities of $30,000-which agrees to the business's change in its cash balance. The $8,000 of depreciation expense was not a source of cash, even though it appears as a positive amount on the statement of cash flows.
What is variable annuity most useful for?
A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date.
Are there tax consequences when you move money from an annuity to a mutual fund?
AnswerThe answer depends upon whether the annuity was purchased inside an IRA or employer-sponsored ("qualified") plan. If so, then money can be transferred from the annuity to any other investment in that plan (for employer sponsored plans, that means only those investments permitted in that plan; for IRAs, it means any investment you wish to purchase within your IRA) without tax.There may be surrender chargesimposed by the annuity, but the transfer will not be a taxable event.If the annuity was purchased outside such plans (with after-tax dollars), then any distribution from the annuity (including a direct transfer to a mutual fund) will be taxable, to the extent of "gain" (contract value in excess of the amount you invested). In addition, if you're under age 59 1/2, there will be a penalty tax of 10% of the distribution (IRC Sect. 72(q)).
How safe is aig annuity?
not safe at all. if AIG folds or goes under, you wake up one morning and the company is closed lie ENRON, and WorldCom. then you lose all your money.
How is the straight line depreciation method different from declining balance method?
Under straight line depreciation, fixed amount of depreciation is charged to every year while in declining balance method depreciation percentage remains same but depreciation is charged on remaining balance of asset due to which the amount of depreciation is different in every year.
What is srtaight line method?
Straight line method of depreciation is that under which any asset is depreciated in equal amount for every year till salvage value. Formula for straight line method: Depreciation = (Cost price - Salvage Value)/Number of years
How do you xxplain different method of providing depreciation?
DEPRECIATION-A noncash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached. There are several accounting methods that are used in order to write off an asset'sdepreciation cost over the period of its useful life. Because it is a non-cash expense, depreciation lowers the company's reported earnings while increasing free cash flow.(i) Fixed Installment or Straight Line Method(ii) Fixed Percentage on Diminishing Balance Method(iii) Sum of the years Digits Method.(iv) Annuity Method.(v) Depreciation Fund Method.(vi) Insurance Policy Method.(vii) Revaluation Method.(viii) Machine Hour Rate Method.(ix) Depletion Method.(x) Repairs Provision Method.(i) Fixed Installment or Straight Line or Fixed Percentage on Original Cost. Under this method, the Depreciation is calculated on the basis of either a fixed percentage of the original value of the asset or divides the original value of asset by the number of years of its estimated life. Every year, the same amount is written off as Depreciation so as to reduce the asset account to nil.Depreciation =(Cost of the Asset + Installation Charges - Scrap Value + Removal Cost) / Estimated useful Life of the Asset(ii) Diminishing Balance Method. Under the diminishing Balance method, depreciation is calculated at a fixed percentage on the opening balance of each year. Each year the opening balance may be decreasing in value. This decreasing book value is commonly known as written down value of the asset. While applying the depreciation rate both salvage or scrap value and removal costs are ignored. There are no possibilities to reduce the book value to zero.(iii) Sum of the Years Digits Method. It gives decreasing depreciation charge year by year. For the purpose of obtaining yearly depreciation diminishing percentages to the cost of the asset, less salvage value is applied. Under this method, the rate of depreciation is a fraction having the sum of the digits representing the useful life of the asset as its denominator and individual year as its numerator.(iv) Annuity Method- Under the Annuity method, the annual depreciation charges would be ascertained with the help of Annuity table. This method gives importance to interest factor. Other methods do not take into account the interest factor while investing the assets. Fixed interest rate is charged on the opening balance of each year and then cost of asset together with interest thereon is written off equally over the life of the asset.(v) Depreciation Fund Method-Depreciation fund method provides an adequate financial requirement for the replacement of the asset when the asset is replaced by a new one. Depreciation fund account is opened and the amount of depreciation is credited to that account. The asset account stands year after year at its original cost. At the end of each year, the amount of depreciation is debited and depreciation fund account is credited and the corresponding amount is invested in securities of some reputed companies, for the purpose of mobilizing funds for replacement.(vi) Insurance Policy -Method. Under this method, an insurance policy is taken from the insurance company for the purpose of replacement of an asset. At the end of the definite period, the insurance company will pay the assured sum with the help of which asset can be repurchased.(vii) Revaluation Method.-This method is suitable for small and diverse items of asset such as bottles, corks, trade marks, loose tools, livestock etc. Under this method the amount of depreciation is ascertained to find the difference between the book value of the asset and the real value of the asset. At the end of the year the difference is taken as depreciation.(viii) Machine Hour Rate Method- The Economic Life of the asset is estimated in terms of working hours. Hourly rate is determined by dividing total cost of the asset by total number of hours to be operated in its life time. The annual depreciation charge is calculated by applying this rate to the actual number of hours operated in the particular accounting period.Machine hour rate = (Cost - Scrap Value ) / Total hours (who1e lifetime)Depreciation for the year = Machine Hour value x Estimated Hours in a year.(ix) Depletion Method-The Economic Life of the asset is determined by geographical survey methods in terms of total units of resource deposits. The depletion rate per unit is calculated by dividing the total cost of the asset by the estimated available number of units.(x) Repairs Provision Method- Under this method, first the total repair and renewal costs are determined for the whole life of the asset and then it is added to the capital cost to get a total value. Then, this value is divided by its estimated life. The resultant value is treated as Repair, Renewals and depreciation. It has to be charged to the profit and loss Account each year. The corresponding Credit is given to provision for depreciation and Repairs account.
What is the Depreciation on Tubular Battery under Companies Act?
What is Depreciation on Tubular Battery under Company Act
What is the distinction between straight line balance method and diminishing balance method?
Straight line method is the method in which asset cost is equally distributed over the entire life of asset and hence the amount of depreciation remain same for every month till salvage value. Under diminishing line method depreciation is charged on diminishing balance of asset every year for the life of asset and the amount remain at the end of life of asset is the salvage value.
If depreciation is charged on original cost than which method of depreciation should be used?
kavita purchased machinery of rs 5 lak on 1 jan 2007 she also paid instullation charged rs 5o thousand, she sold the machinary 2011 rs 4 lack depreciation is charged at 10 % on 31 dec pass the necessary journal entry under original cost method.
What is annuity unit?
Annuity Unit is fixed sum payable to the Annuitant under the options offered and chosen by him.
Is depreciation charged on the original cost or the difference between original cost and salvage value in written down value method?
Under written down balance method depreciation is charged from original value and after that on written down balance until useful life of asset and any amount remaining at the end of useful life is the salvage value.
What is book depreciation mean?
The depreciation rate for accounting may be different than that of taxation. The depreciation as per books of accounts may often be termed as book depreciation while that calculated under tax law is termed as tax depreciation.
Depreciation rate for mobile phone under income tax act?
Depreciation on Mobile Phone will be charged @ 15%.
How do you account difference between depreciation as book and depreciation as tax?
This will be found under "deferred taxes" on the income statement.
Accumulated Depreciation is reported on the income sheet?
no. accumulated depreciation goes under non current asset on the Balance sheet
