Question
Photo Tonight, a film-developing and camera-repair franchise, began business on January 1, 2022. In the process of beginning operations, it incurred the following capital expenditures:
Photo Tonight, a film-developing and camera-repair franchise, began business on January 1, 2022. In the process of beginning operations, it incurred the following capital expenditures:
Developing equipment | $ | 85,000 |
Furniture and fixtures | 35,000 | |
Small tools (under $500) | 20,000 | |
Franchise (expires in 20 years) | 80,000 | |
Incorporation costs | 6,000 | |
Pickup truck | 14,000 | |
Leasehold improvements (10-year lease) | 32,000 |
The business was immediately successful and generated substantial profits for the years ended December 31, 2022 and 2023.
In 2023, the truck was traded in for a larger unit costing $ 20,100. A value of $ 7,000 was assigned to the old truck when it was traded in.
In 2024, the owner was forced to leave the business due to illness. As a result, the assets were valued and sold on December 31, 2024, for the following values:
Developing equipment | $ | 65,000 |
Furniture and fixtures | 15,000 | |
Small tools | 12,000 | |
Franchise | 84,000 | |
Incorporation costs | 0 | |
Pickup truck | 15,000 | |
Leasehold improvements | 15,000 | |
Goodwill | 40,000 |
Required: Complete the table below to calculate the effect of all these transactions on net income for tax purposes for the 2022, 2023, and 2024 taxation years. Assume none of the assets are designated immediate expensing property. (Use a minus sign (-) when entering numbers that reduce UCC.)
|
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