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Chapter 09 Property Acquisition and Cost Recovery

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Question;Chapter 09;Property Acquisition and Cost Recovery;True / False Questions;1.;Like financial accounting, most business property must be;capitalized for tax purposes.;True False;2.;Tax cost recovery methods include depreciation;amortization, and depletion.;True False;3.;If a business mistakenly claims too little depreciation, the;business must only reduce the asset's basis by the depreciation actually taken;rather than the amount of the allowable depreciation.;True False;4.;An asset's capitalized cost basis includes only the actual;purchase price, whereas the other expenses associated with the asset are;immediately expensed.;True False;5.;The basis for a personal use asset converted to business use;is the lesser of the asset's cost basis or fair market value on the date of the;transfer or conversion.;True False;6.;Depreciation is currently computed under the Modified;Accelerated Cost Recovery System (MACRS).;True False;7.;The 200 percent or double declining balance method is;allowable for five and seven year property.;True False;8.;Taxpayers may use historical data to determine the recovery;period for tax depreciation.;True False;9.;Taxpayers use the half-year convention for all assets.;True False;10.;If a taxpayer places only one asset (a building) in service;during the fourth quarter of the year, the mid-quarter convention must be used.;True False;11.;The MACRS depreciation tables automatically switch to the straight-line;method when it exceeds the declining balance method.;True False;12.;If tangible personal property is depreciated using the;half-year convention and is disposed of during the first quarter of a;subsequent year, the taxpayer must use the mid-quarter convention for the year;of disposition.;True False;13.;If a machine (seven-year property) being depreciated using;the half-year convention is disposed of during the seventh year, a taxpayer;must multiply the appropriate depreciation percentage from the MACRS table;percentage by 50 percent to calculate the depreciation expense properly.;True False;14.;Real property is always depreciated using the straight-line;method.;True False;15.;The mid-month convention applies to real property in the;year of acquisition and disposition.;True False;16.;All taxpayers may use the ?179 immediate expensing election;on certain property.;True False;17.;The ?179 immediate expensing election phases out based upon;a taxpayer's taxable income.;True False;18.;The ?179 immediate expensing election phases out based upon;the amount of tangible personal property a taxpayer places in service during;the year.;True False;19.;Property expensed under the ?179 immediate expensing;election is not included in the 40 percent test to determine whether the;mid-quarter convention must be used.;True False;20.;In general, a taxpayer should select longer-lived property;for the ?179 immediate expensing election.;True False;21.;Occasionally bonus depreciation is used as a stimulus tool;by tax policy makers.;True False;22.;Business assets that tend to be used for both business and;personal purposes are referred to as listed property.;True False;23.;If the business use percentage for listed property falls;below 50 percent, the only adjustment is all future depreciation must be;calculated under the straight-line method.;True False;24.;Significant limits are placed on the depreciation of luxury;automobiles.;True False;25.;The alternative depreciation system requires both a slower;method of recovery and longer recovery periods.;True False;26.;The method for tax amortization is always the straight-line;method.;True False;27.;All assets subject to amortization have the same recovery;period.;True False;28.;Goodwill and customer lists are examples of ?197 amortizable;assets.;True False;29.;Taxpayers may always expense a portion of start-up costs and;organizational expenditures.;True False;30.;Businesses may immediately expense research and;experimentation expenditures or they may elect to capitalize these costs and;amortize them using the straight-line method over a period of not less than 60;months.;True False;31.;The manner in which a business amortizes a patent or;copyright is the same whether the business directly purchases the patent or;copyright or whether it self-creates the intangible.;True False;32.;Depletion is the method taxpayers use to recover their;capital investment in natural resources.;True False;33.;In general, major integrated oil and gas producers may take;the greater of cost or percentage depletion.;True False;34.;Cost depletion is available to all natural resource;producers.;True False;35.;Businesses deduct percentage depletion when they sell the;natural resource and they deduct cost depletion in the year they produce or;extract the natural resource.;True False;Multiple Choice Questions;36.;Tax cost recovery methods do not include;A.;Amortization;B.;Capitalization;C.;Depletion;D.;Depreciation;E.;All of these are tax cost recovery methods;37.;Which of the following business assets is not depreciated?;A.;Automobile;B.;Building;C.;Patent;D.;Machinery;E.;All of these are depreciated;38.;An office desk is an example of;A.;Personal property;B.;Personal-use property;C.;Real property;D.;Business property;E.;Both personal property and business property;39.;An example of an asset that is both personal-use and;personal property is;A.;A computer used solely to email company employees regarding;company activities;B.;A storage building used by the CEO to store personal records;C.;A computer used solely to monitor the CEO's investments and;to complete her Form 1040;D.;A company airplane used by the CEO for business travel;E.;All of these are personal-use and personal property;40.;Which of the following is not usually included in an asset's;tax basis?;A.;Purchase price;B.;Sales tax;C.;Shipping;D.;Installation costs;E.;All of these are included in an asset's tax basis;41.;Which of the following would be considered an improvement;rather than a routine maintenance?;A.;Oil change;B.;Engine overhaul;C.;Wiper blade replacement;D.;Air filter change;42.;Tax depreciation is currently calculated under what system?;A.;Sum of the years digits;B.;Accelerated cost recovery system;C.;Modified accelerated cost recovery system;D.;Straight line system;E.;None of these;43.;Which is not an allowable method under MACRS?;A.;150 percent declining balance;B.;200 percent declining balance;C.;Straight line;D.;Sum of the years digits;E.;All of these are allowable methods under MACRS;44.;Which of the allowable methods allows the most accelerated;depreciation?;A.;150 percent declining balance;B.;200 percent declining balance;C.;Straight line;D.;Sum of the years digits;E.;None of these allow accelerated depreciation;45.;How is the recovery period of an asset determined?;A.;Estimated useful life;B.;Treasury regulation;C.;Revenue Procedure 87-56;D.;Revenue Ruling 87-56;E.;None of these;46.;Which of the following depreciation conventions are not used;under MACRS?;A.;Full-month;B.;Half-year;C.;Mid-month;D.;Mid-quarter;E.;All of these are used under MACRS;47.;Which depreciation convention is the general rule for;tangible personal property?;A.;Full-month;B.;Half-year;C.;Mid-month;D.;Mid-quarter;E.;None of these are conventions for tangible personal property;48.;The MACRS recovery period for automobiles and computers is;A.;3 years;B.;5 years;C.;7 years;D.;10 years;E.;None of these;49.;Lax, LLC purchased only one asset during the current year.;Lax placed in service computer equipment (5-year property) on August 26 with a;basis of $20,000. Calculate the maximum depreciation expense for the current;year (ignoring ?179 and bonus depreciation);A.;$2,000;B.;$2,858;C.;$3,000;D.;$4,000;E.;None of these;50.;Sairra, LLC purchased only one asset during the current;year. Sairra placed in service furniture (7-year property) on April 16 with a;basis of $25,000. Calculate the maximum depreciation expense for the current;year, rounding to a whole number (ignoring ?179 and bonus depreciation);A.;$1,786;B.;$3,573;C.;$4,463;D.;$5,000;E.;None of these;51.;Beth's business purchased only one asset during the current;year. Beth placed in service machinery (7-year property) on December 1 with a;basis of $50,000. Calculate the maximum depreciation expense (ignoring ?179 and;bonus depreciation);A.;$1,785;B.;$2,500;C.;$7,145;D.;$10,000;E.;None of these;52.;Deirdre's business purchased two assets during the current;year. Deirdre placed in service computer equipment (5-year property) on January;20 with a basis of $15,000 and machinery (7-year property) on October 1 with a;basis of $15,000. Calculate the maximum depreciation expense, rounded to a;whole number (ignoring ?179 and bonus depreciation);A.;$1,286;B.;$5,144;C.;$5,786;D.;$6,000;E.;None of these;53.;Suvi, Inc. purchased two assets during the current year.;Suvi placed in service computer equipment (5-year property) on August 10 with a;basis of $20,000 and machinery (7-year property) on November 18 with a basis of;$10,000. Calculate the maximum depreciation expense, rounded to a whole number;(ignoring ?179 and bonus depreciation);A.;$857;B.;$3,357;C.;$5,429;D.;$6,000;E.;None of these;54.;Wheeler LLC purchased two assets during the current year.;Wheeler placed in service computer equipment (5-year property) on November 16;with a basis of $15,000 and furniture (7-year property) on April 20 with a;basis of $11,000. Calculate the maximum depreciation expense, rounding to a;whole number (ignoring ?179 and bonus depreciation);A.;$1,285;B.;$2,714;C.;$4,572;D.;$5,200;E.;None of these;55.;Tasha LLC purchased furniture (7-year property) on April 20;with a basis of $20,000 and used the mid-quarter convention. During the current;year, which is the fourth year Tasha LLC owned the property, the property was;disposed of on December 15. Calculate the maximum depreciation expense;rounding to a whole number;A.;$898;B.;$2,095;C.;$2,461;D.;$2,394;E.;None of these;56.;Anne LLC purchased computer equipment (5-year property) on;August 29 with a basis of $30,000 and used the half-year convention. During the;current year, which is the fourth year Anne LLC owned the property, the;property was disposed of on January 15. Calculate the maximum depreciation;expense;A.;$432;B.;$1,728;C.;$1,874;D.;$3,456;E.;None of these;57.;Poplock LLC purchased a warehouse and land during the;current year for $350,000. The purchase price was allocated as follows;$275,000 to the building and $75,000 to the land. The property was placed in;service on August 12. Calculate Poplock's maximum depreciation for this first;year, rounded to the nearest whole number;A.;$2,648;B.;$3,371;C.;$3,751;D.;$4,774;E.;None of these;58.;Tom Tom LLC purchased a rental house and land during the;current year for $150,000. The purchase price was allocated as follows;$100,000 to the building and $50,000 to the land. The property was placed in;service on May 22. Calculate Tom Tom's maximum depreciation for this first;year;A.;$1,605;B.;$2,273;C.;$2,408;D.;$3,410;E.;None of these;59.;Simmons LLC purchased an office building and land several;years ago for $250,000. The purchase price was allocated as follows: $200,000;to the building and $50,000 to the land. The property was placed in service on;October 2. If the property is disposed of on February 27 during the 10th year;calculate Simmons' maximum depreciation in the 10th year;A.;$641;B.;$909;C.;$5,128;D.;$7,346;E.;None of these;60.;Which of the following assets are eligible for ?179;expensing?;A.;Used office machinery;B.;Qualified leasehold improvements;C.;A new delivery truck;D.;Used office furniture;E.;All of these;61.;Lenter LLC placed in service on April 29, 2014 machinery and;equipment (7-year property) with a basis of $600,000. Assume that Lenter has;sufficient income to avoid any limitations. Calculate the maximum depreciation;expense including section 179 expensing (but ignoring bonus expensing). Assume;that the 2013 ?179 limits are extended to 2014;A.;$85,740;B.;$120,000;C.;$514,290;D.;$585,740;E.;None of these;62.;Littman LLC placed in service on July 29, 2014 machinery and;equipment (7-year property) with a basis of $600,000. Littman's income for the;current year before any depreciation expense was $100,000. Which of the;following statements is true to maximize Littman's total depreciation expense;for 2014? (Assume that the 2013 ?179 limits are extended to 2014.);A.;Littman should take ?179 expense equal to the maximum;$500,000.;B.;Littman should take no ?179 expense.;C.;Littman's ?179 expense will be greater than $100,000.;D.;Littman's ?179 expense will be less than $100,000.;E.;None of these.;63.;Crouch LLC placed in service on May 19, 2014 machinery and;equipment (7-year property) with a basis of $2,200,000. Assume that Crouch has;sufficient income to avoid any limitations. Calculate the maximum depreciation;expense including ?179 expensing (but ignoring bonus expensing). Assume that;the 2013 ?179 limits are extended to 2014;A.;$314,380.;B.;$440,000.;C.;$571,510.;D.;$742,930.;E.;None of these.;64.;Clay LLC placed in service machinery and equipment (7-year;property) with a basis of $2,450,000 on June 6, 2014. Assume that Clay has;sufficient income to avoid any limitations. Calculate the maximum depreciation;expense including ?179 expensing (ignoring any possible bonus expensing);rounded to a whole number. Assume that the 2013 ?179 limits are extended to;2014;A.;$350,105;B.;$392,960;C.;$778,070;D.;$864,395;E.;None of these;65.;Bonnie Jo purchased a used computer (5-year property) for;use in her sole proprietorship. The basis of the computer was $2,400. Bonnie Jo;used the computer in her business 60 percent of the time and used it for;personal purposes the rest of the time during the first year. Calculate Bonnie;Jo's depreciation expense during the first year assuming the sole;proprietorship had a loss during the year (Bonnie did not place the property in;service in the last quarter);A.;$240;B.;$288;C.;$480;D.;$2,400;E.;None of these;66.;Billie Bob purchased a used computer (5-year property) for;use in his sole proprietorship in the prior year. The basis of the computer was;$2,400. Billie Bob used the computer in his business 60 percent of the time;during the first year. During the second year, Billie Bob used the computer 40;percent for business use. Calculate Billie Bob's depreciation expense during;the second year assuming the sole proprietorship had a loss during the year;(Billie Bob did not place the asset in service in the last quarter);A.;$0;B.;$48;C.;$192;D.;$336;E.;None of these;67.;Which of the following assets is eligible for bonus;depreciation?;A.;Used office machinery;B.;Qualified leasehold improvements;C.;A new delivery truck;D.;Used office furniture;E.;All of these;68.;Potomac LLC purchased an automobile for $30,000 on August 5;2014. What is Potomac's depreciation expense for 2014 (ignore any possible;bonus depreciation)?;A.;$3,160;B.;$4,287;C.;$6,000;D.;$30,000;E.;None of these;69.;Arlington LLC purchased an automobile for $40,000 on July 5;2014. What is Arlington's depreciation expense for 2014 if its business use;percentage is 75 percent (ignore any possible bonus depreciation)?;A.;$2,370;B.;$3,160;C.;$6,000;D.;$8,000;E.;None of these;70.;Assume that Bethany acquires a competitor's assets on March;31st. The purchase price was $150,000. Of that amount, $125,000 is allocated to;tangible assets and $25,000 is allocated to goodwill (a ?197 intangible asset).;What is Bethany's amortization expense for the current year, rounded to the;nearest whole number?;A.;$0;B.;$1,250;C.;$1,319;D.;$1,389;E.;None of these;71.;Assume that Brittany acquires a competitor's assets on;September 30th of year 1 for $350,000. Of that amount, $300,000 is allocated to;tangible assets and $50,000 is allocated equally to two ?197 intangible assets;(goodwill and a 1-year non-compete agreement). Given, that the non-compete;agreement expires on September 30th of year 2, what is Brittany's amortization;expense for the second year, rounded to the nearest whole number?;A.;$0;B.;$1,667;C.;$2,917;D.;$3,333;E.;None of these;72.;Jasmine started a new business in the current year. She;incurred $10,000 of start-up costs. How much of the start-up costs can be;immediately expensed for the year?;A.;$0;B.;$2,500;C.;$5,000;D.;$10,000;E.;None of these;73.;Racine started a new business in the current year. She;incurred $52,000 of start-up costs. If her business started on November 23rd of;the current year, what is the total expense she may deduct with respect to the;start-up costs for her initial year, rounded to the nearest whole number?;A.;$2,555;B.;$3,544;C.;$5,522;D.;$52,000;E.;None of these;74.;Daschle LLC completed some research and development during;June of the current year. The related costs were $60,000. If Daschle wants to;capitalize and amortize the costs as quickly as possible, what is the total;amortization expense Daschle may deduct during the current year?;A.;$0;B.;$6,500;C.;$7,000;D.;$12,000;E.;None of these;75.;Jorge purchased a copyright for use in his business in the;current year. The purchase occurred on July 15th and the purchase price was;$75,000. If the patent has a remaining life of 75 months, what is the total;amortization expense Jorge may deduct during the current year?;A.;$0;B.;$5,500;C.;$6,000;D.;$12,000;E.;None of these;76.;Geithner LLC patented a process it developed in the current;year. The patent is expected to create benefits for Geithner over a 10 year;period. The patent was issued on April 15th and the legal costs associated with;the patent were $43,000. In addition, Geithner had unamortized research;expenditures of $15,000 related to the process. What is the total amortization;expense Geithner may deduct during the current year?;A.;$2,417;B.;$2,559;C.;$4,108;D.;$4,350;E.;None of these;77.;Santa Fe purchased the rights to extract turquoise on a;tract of land over a five-year period. Santa Fe paid $300,000 for extraction;rights. A geologist estimates that Santa Fe will recover 5,000 pounds of;turquoise. During the current year, Santa Fe extracted 1,500 pounds of;turquoise, which it sold for $200,000. What is Santa Fe's cost depletion;expense for the current year?;A.;$60,000;B.;$90,000;C.;$110,000;D.;$300,000;E.;None of these;78.;Santa Fe purchased the rights to extract turquoise on a;tract of land over a five-year period. Santa Fe paid $300,000 for extraction;rights. A geologist estimated that Santa Fe will recover 5,000 pounds of;turquoise. During the past several years, 4,000 pounds were extracted. During;the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold;for $250,000. What is Santa Fe's cost depletion expense for the current year?;A.;$60,000;B.;$90,000;C.;$190,000;D.;$160,000;E.;None of these;79.;Lucky Strike Mine (LLC) purchased a silver deposit for;$1,500,000. It estimated it would extract 500,000 ounces of silver from the;deposit. Lucky Strike mined the silver and sold it reporting gross receipts of;$1.8 million, $2.5 million, and $2 million for years 1 through 3, respectively.;During years 1 - 3, Lucky Strike reported net income (loss) from the silver;deposit activity in the amount of ($100,000), $400,000, and $100,000;respectively. In years 1 - 3, Lucky Strike actually extracted 300,000 ounces of;silver as follows;What is Lucky Strike's depletion expense for year 2 if the;applicable percentage depletion for silver is 15 percent?;A.;$200,000;B.;$375,000;C.;$400,000;D.;$450,000;E.;None of these;Essay Questions;80.;Janey purchased machinery on April 8th of the current year.;The relevant costs for the year are as follows: machinery for $10,000, $800;shipping, $50 for delivery insurance, $500 for installation, $750 for sales;tax, $150 for the annual tune up, and $200 of property taxes (an annual tax on;business property). What is Janey's tax basis for the machinery?;81.;Jaussi purchased a computer several years ago for $2,200 and;used it for personal purposes. On November 10th of the current year, when the;fair market value of the computer was $800, Jaussi converted it to business;use. What is Jaussi's tax basis for the computer?;82.;Flax, LLC purchased only one asset during 2014. Flax placed;in service a computer (5-year property) on January 16 with a basis of $14,000.;Calculate the maximum depreciation expense (ignoring ?179 and bonus;depreciation).;83.;Roth, LLC purchased only one asset during the current year.;Roth placed in service computer equipment (5-year property) on November 1st;with a basis of $42,500. Calculate the maximum depreciation expense (ignoring;?179 and bonus depreciation).;84.;Eddie purchased only one asset during the current year.;Eddie placed in service furniture (7-year property) on May 1st with a basis of;$26,500. Calculate the maximum depreciation expense, rounded to the nearest;whole number (ignoring ?179 and bonus depreciation).;85.;Teddy purchased only one asset during the current year.;Teddy placed in service machinery (7-year property) on October 1st with a basis;of $76,500. Calculate the maximum depreciation expense, rounded to the nearest;whole number (ignoring ?179 and bonus depreciation).;86.;Amit purchased two assets during the current year. Amit;placed in service computer equipment (5-year property) on April 16th with a;basis of $5,000 and furniture (7-year property) on September 9th with a basis;of $20,000. Calculate the maximum depreciation expense (ignoring ?179 and bonus;depreciation).;87.;Yasmin purchased two assets during the current year. Yasmin;placed in service computer equipment (5-year property) on May 26th with a basis;of $10,000 and machinery (7-year property) on December 9th with a basis of;$10,000. Calculate the maximum depreciation expense (ignoring ?179 and bonus;depreciation).;88.;Bonnie Jo used two assets during the current year. The first;was computer equipment with an original basis of $15,000, currently in the;second year of depreciation, and under the half-year convention. This asset was;disposed of on October 1st of the current year. The second was furniture with;an original basis of $24,000 placed in service during the first quarter;currently in the fourth year of depreciation, and under the mid-quarter;convention. What is Bonnie Jo's depreciation expense for the current year;rounded to the nearest whole number?;89.;Kristine sold two assets on March 20th of the current year.;The first was machinery with an original basis of $51,000, currently in the;fourth year of depreciation, and under the half-year convention. The second was;furniture with an original basis of $16,000 placed in service during the fourth;quarter, currently in the third year of depreciation, and under the mid-quarter;convention. What is Kristine's depreciation expense for the current year;rounded to the nearest whole number?;90.;Timothy purchased a new computer for his consulting practice;on October 15th of the current year. The basis of the computer was $4,000.;During the Thanksgiving holiday, he decided the computer didn't meet his;business needs and gave it to his college-aged son in another state. The;computer was never used for business purposes again. Timothy had $50,000 of;taxable income before depreciation. What is Timothy's total cost recovery;expense with respect to the computer during the current year?;91.;During August of the prior year, Julio purchased an;apartment building that he used as a rental property. The basis was $1,400,000.;Calculate the maximum depreciation expense during the current year.;92.;During April of the current year, Ronen purchased a;warehouse that he used for business purposes. The basis was $1,600,000.;Calculate the maximum depreciation expense during the current year.;93.;An office building was purchased on December 9th several;years ago for $2,500,000. The purchase price was allocated as follows: building;$1,900,000, landscaping $100,000, and land $500,000. During the current year;the 10th year, the building was sold on March 10th. Calculate the maximum;depreciation expense for the real property during the current year, rounded to;the nearest whole number.;94.;Olney LLC placed in service on July 19, 2014 machinery and;equipment (7-year property) with a basis of $850,000. Assume that Olney has;sufficient income to avoid any limitations. Calculate the maximum depreciation;expense including ?179 expensing, rounded to the nearest whole number (but;ignoring bonus expensing). Assume the 2013 ?179 limits are extended to 2014.;95.;Columbia LLC placed in service on October 9, 2014 machinery;and equipment (7-year property) with a basis of $2,150,000. Assume that;Columbia has sufficient income to avoid any limitations. Calculate the maximum;depreciation expense including ?179 expensing (but ignoring bonus expensing);for the year, rounded to the nearest whole number. Assume the 2013 ?179 limits;are extended to 2014.;96.;In 2014, Northern LLC placed in service on September 6th;machinery and equipment (7-year property) with a basis of $2,200,000. Assume;that Northern has sufficient income to avoid any limitations. Calculate the;maximum depreciation expense including ?179 expensing (ignore any potential;bonus expensing), rounded to the nearest whole number. Assume the 2013 ?179;limits are extended to 2014.;97.;Reid acquired two assets this year: computer equipment;(5-year property) acquired on August 6th;with a basis of $500,000 and machinery (7-year property) on November 9th with a;basis of $500,000. Assume that Reid has sufficient income to avoid any;limitations. Calculate the maximum depreciation expense including ?179;expensing (but not bonus expensing). Assume the 2013 ?179 limits are extended;to 2014.;98.;Phyllis purchased $8,000 of specialized audio equipment that;she uses in her business regularly. Occasionally, she uses the equipment for;personal use. During the first year, Phyllis used the equipment for business;use 70 percent of the time, however, during the current (second) year the;business use fell to 40 percent. Assume that the equipment is seven-year MACRS;property and is under the half-year convention. Assume the ADS recovery period;is 10 years. What is the depreciation allowance for the current year, rounded;to the nearest whole number?;99.;Alexandra purchased a $35,000 automobile during 2014. The;business use was 70 percent. What is the allowable depreciation for the current;year (ignore any possible bonus depreciation)?;100.;Boxer LLC has acquired various types of assets recently.;Below is a list of assets acquired during 2013 and 2014;Boxer did not elect ?179 expense or potential bonus;depreciation in 2013, but would like to elect ?179 expense for 2014 (assume;that taxable income is sufficient). Calculate Boxer's maximum depreciation;expense for 2014, rounded to the nearest whole number (ignore bonus;depreciation for 2014). If necessary, use the 2013 luxury automobile limitation;amount for 2014 and assume that the 2013 ?179 limits are extended to 2014.;101.;Assume that Yuri acquires a competitor's assets on May 1st.;The purchase price was $500,000. Of the amount, $325,000 is allocated to;tangible assets and $175,000 is allocated to goodwill (a ?197 intangible;asset). What is Yuri's amortization expense for the current year, rounded to;the nearest whole number?;102.;Assume that Cannon LLC acquires a competitor's assets on;June 15th of a prior year. The purchase price was $450,000. Of the amount;$196,200 is allocated to tangible assets and $253,800 is allocated to three;?197 intangible assets: $153,000 to goodwill, $50,400 to a customer list with;an expected life of 8 years, and $50,400 to a 3 year non-compete agreement. On;May 30th of the second year, the customer list is sold for $10,000. Please;round your amortization amounts to the nearest whole number. Round your;allocation percentage to the nearest whole percentage (e.g.,.1234 as 12%).;1) What is Cannon's amortization expense for the second;year?;2) What is the basis of the intangibles at the end of the;second year?;103.;Oksana started an LLC on November 2 of the current year. She;incurred $30,000 of start-up costs. How much of the start-up costs can be;immediately expensed for the year? How much amortization may Oksana deduct in;the first year?;104.;Putin Corporation began business on September 23rd of the;current year. It incurred $40,000 of start-up costs and $60,000 of;organizational expenditures.;1) How much may be immediately expensed for the year?;2) How much amortization may be deducted in the first year;rounded to the nearest whole number?;105.;Paulsen incurred $55,000 of research and experimental;expenses and began amortizing them over 60 months during June of year 1. During;May of year 3, Paulsen received a patent based upon the research being;amortized. $36,000 of legal expenses for the patent was incurred.;1) What is the basis of the patent, rounding amortization;for each year to the nearest whole number?;2) What is the amortization expense with respect to the;patent during the year it was issued, rounded to the nearest whole number?;106.;Sequoia purchased the rights to cut timber on several tracts;of land over a fifteen year period. It paid $500,000 for cutting rights. A;timber engineer estimates that 500,000 board feet of timber will be cut. During;the current year, Sequoia cut 45,000 board feet of timber, which it sold for;$900,000. What is Sequoia's cost depletion expense for the current year?;107.;PC Mine purchased a platinum deposit for $3,500,000. It;estimated it would extract 17,000 ounces of platinum from the deposit. PC mined;the platinum and sold it reporting gross receipts of $500,000 and $8 million;for years 1 and 2, respectively. During years 1 and 2, PC reported net income;(loss) from the platinum deposit activity in the amount of ($100,000) and;$3,800,000, respectively. In years 1 and 2, PC actually extracted 2,000 and;8,000 ounces of platinum. What is PC's depletion expense for years 1 and 2 if;the applicable percentage depletion for platinum is 22 percent, rounded to the;nearest whole number?

 

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