Question
1.Belsap Inc., a calendar year taxpayer, purchased a total of $590,000 depreciable personalty during May 2016. Which of the following statements is true ? a.Belsap
1.Belsap Inc., a calendar year taxpayer, purchased a total of $590,000 depreciable personalty during May 2016. Which of the following statements is true?
a.Belsap can elect to expense 100% of the cost.
b.The amount of cost that Belsap can elect to expense depends on Belsap's 2016 taxable income.
c.Belsap can elect to expense $500,000 of the cost. The $90,000 remaining cost is capitalized and subject to MACRS depreciation.
d.Belsap can elect to expense $500,000 of the cost. The $90,000 remaining cost is capitalized and is not depreciable.
2.Mr. and Mrs. Schulte paid a $750,000 lump-sum price to purchase a business. At date of purchase, the appraised FMVs of the balance sheet assets were:
|
|
|
|
Accounts receivable | $ | 38,000 |
|
Inventory |
| 415,000 |
|
Fixtures and equipment |
| 147,000 |
|
| $ | 600,000 |
|
Which of the following statements is true?
a.The Schultes must allocated the $750,000 cost to the balance sheet assets based on the assets' relative FMV.
b.The Schultes must capitalize $150,000 of the cost to nonamortizable goodwill.
c.The Schultes may deduct $150,000 of the cost as business goodwill.
d.None of the choices are true.
3.Szabi Inc., a calendar year taxpayer, purchased two assets during 2016: a machine costing $380,000 and computer equipment costing $403,500. The machine is 7-year recovery property and the computer equipment is 5-year recovery property. Which of the following statements is true?
a.Szabi should elect to expense the $380,000 cost of the machine and $120,000 of the cost of the computer equipment.
b.Szabi should elect to expense the $403,500 cost of the computer equipment machine and $96,500 of the cost of the machine.
c.Szabi must elect to expense $250,000 of the cost of the machine and $250,000 of the cost of the computer equipment.
d.Szabi is indifferent as to which costs to expense.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started