Comprehensive Problem 10-77 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5) [The following information applies to the questions displayed below.] While completing undergraduate school work in information systems, Dallin Bourne and Michael Banks decided to start a technology support company called eSys Answers. During year 1, they bought the following assets and incurred the following start-up fees: Year 1 Assets Computers (5-year) Office equipment (7-year) Furniture (7-year) Start-up costs Purchase Date October 30, y1 October 30, Yi October 30, Yl October 30, y1 Basis $ 15,000 10,000 3,000 1 7,000 In April of year 2, they decided to purchase a customer list from a company providing virtually the same services, started by fellow information systems students preparing to graduate. The customer list cost $10,000 and the sale was completed on April 30. During their summer break, Dallin and Michael passed on internship opportunities in an attempt to really grow their business into something they could do full-time after graduation. In the summer, they purchased a small van (for transportation, not considered a luxury auto) and a pinball machine (to help attract new employees). They bought the van on June 15, Y2, for $15,000 and spent $3,000 getting it ready to put into service. The pinball machine cost $4,000 and was placed in service on July 1, Y2. Year 2 Assets Van Pinball machine (7-year) Customer list Purchase Date June 15, Y2 July 1, Y2 April 30, Y2 Basis $ 18,000 4,000 10,000 Assume that eSys Answers does not claim any $179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Comprehensive Problem 10-77 Part a and Part c Required: a. What are the maximum cost recovery deductions for eSys Answers for Y1 and Y2? c. What is eSys Answers's basis in each of its assets at the end of Y2? Answer is complete and correct. Complete this question by entering your answers in the tabs below. Req A Reqc What are the maximum cost recovery deductions for eSys Answers for Y1 and Y2? Y1 Recovery deductions $ 6,414 $ 14,754 Y2 ReqA Reqc > Answer is complete and correct. Complete this question by entering your answers in the tabs below. Reg A Reqc What is eSys Answers's basis in each of its assets at the end of Y2? Asset Original Basis Computer Equipment Office Equipment Furniture $ $ $ $ $ $ $ $ Start-up costs Adjusted Basis Year 2 Yr 2 Immediate Year 1 Cost Cost Ending Expense Recovery Recovery Basis $ 0 $ 750 $ 5,700 $ 8,550 $ 0 $ 357 $ 2,755 $ 6,888 $ 0 $ 107 $ 827 $ 2,066 $ 5,000 $ 200 $ 800 $ 11,000 $ 0 $ 0 $ 3,600 $ 14,400 $ 0 $ 0 $ 572 $ 3,428 $ 0 $ 0 $ 500 $ 9,500 $ 5,000 $ 1,414 $ 14,754 $ 55,832 15,000 10,000 3,000 17,000 18,000 4,000 10,000 77,000 Van Pinball machine Customer List Totals
