Question 1

Which of the following assets is eligible for §179 expensing?

Accepted Answer

A)   Used office machinery
B)   Qualified improvement property
C)   A new delivery truck
D)   Used office furniture
E)   All of the choices are correct. E

Question 2

Which of the following would be considered an improvement rather than routine maintenance?

Accepted Answer

A)   Oil change
B)   Engine overhaul
C)   Wiper blade replacement
D)   Air filter change B

Question 3

Arlington LLC purchased an automobile for $62,000 on July 5, 2020. What is Arlington's depreciation deduction for 2020 if its business-use percentage is 61 percent? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)

Accepted Answer

A)   $4,775
B)   $6,200
C)   $6,161
D)   $9,300
E)   None of the choices are correct. C

Question 4

Patin Corporation began business on September 23 ^rd of the current year. It incurred $40,000 of start-up costs and $60,000 of organizational expenditures. How much total amortization may be deducted in the first year? (Round final answer to the nearest whole number.)

Accepted Answer

The answer of Patin Corporation began business on September 23...

Question 5

Assume that Yuri acquires a competitor's assets on May 1^st. The purchase price was $508,000. Of that amount, $329,000 is allocated to tangible assets and $179,000 is allocated to goodwill (a §197 intangible asset). What is Yuri's amortization deduction for the current year?(Round final answer to the nearest whole number.)

Accepted Answer

The answer of Assume that Yuri acquires a competitor's assets...

Question 6

Northern LLC only purchased one asset this year. In 2020, Northern LLC placed in service on September 6^t^h machinery and equipment (seven-year property) with a basis of $3,180,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignore any potential bonus expensing). (Use MACRS Table 1.)

Accepted Answer

The answer of Northern LLC only purchased one asset this...

Question 7

The 200 percent or double declining balance method is allowable for five- and seven-year property.

Accepted Answer

A) True 
 B)False

Question 8

Cost depletion is available to all natural resource producers.

Accepted Answer

A) True 
 B)False

Question 9

Taylor LLC purchased an automobile for $55,000 on July 5, 2020. What is Taylor's maximum depreciation deduction for 2020 (including bonus depreciation) if its business use percentage is 100 percent?

Accepted Answer

A)   $10,100
B)   $11,000
C)   $18,100
D)   $55,000
E)   None of the choices are correct.

Question 10

Tax depreciation is currently calculated under what system?

Accepted Answer

A)   Sum-of-the-years'-digits
B)   Accelerated cost recovery system
C)   Modified Accelerated Cost Recovery System
D)   Straight-line system
E)   None of the choices are correct.

Question 11

Jasmine started a new business in the current year. She incurred $22,000 of start-up costs. How much of the start-up costs can be immediately deducted (excluding amounts amortized over 180 months) for the year?

Accepted Answer

A)   $0
B)   $2,500
C)   $5,000
D)   $22,000
E)   None of the choices are correct.

Question 12

Amit purchased two assets during the current year.On April 16^th Amit placed in service computer equipment (five-year property) with a basis of $5,000 and on September 9^th placed in service furniture (seven-year property) with a basis of $20,000. Calculate the maximum depreciation deduction (ignoring §179 and bonus depreciation). (Use MACRS Table 1.)

Accepted Answer

The answer of Amit purchased two assets during the current...

Question 13

Lax LLC purchased only one asset during the current year (a full 12-month tax year).On August 26 Lax placed in service computer equipment (five-year property) with a basis of $20,000. Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation). (Use MACRS Table 1.)

Accepted Answer

A)   $2,000
B)   $2,858
C)   $3,000
D)   $4,000
E)   None of the choices are correct.

Question 14

Bonus depreciation is used as a stimulus tool by tax policy makers.

Accepted Answer

A) True 
 B)False

Question 15

If the business-use percentage for listed property falls below 50 percent, the only adjustment isthat all future depreciation must be calculated under the straight-line method.

Accepted Answer

A) True 
 B)False

Question 16

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. (Use MACRS Table 5.) (Round final answer to the nearest whole number.)

Accepted Answer

A)   $2,648
B)   $3,371
C)   $3,751
D)   $4,774
E)   None of the choices are correct.

Question 17

Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $2,400. Bonnie Jo used the camera 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 deduction 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.) (Use MACRS Table 1.)

Accepted Answer

A)   $240
B)   $288
C)   $480
D)   $2,400
E)   None of the choices are correct.

Question 18

Depreciation is currently computed under the Modified Accelerated Cost Recovery System (MACRS).

Accepted Answer

A) True 
 B)False

Question 19

Lenter LLC placed in service on April 29, 2020, machinery and equipment (seven-year property) with a basis of $1,600,000. Assume that Lenter has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus expensing). (Use MACRS Table 1.)

Accepted Answer

A)   $228,640
B)   $1,040,000
C)   $1,120,024
D)   $1,268,640
E)   None of the choices are correct.

Question 20

Timothy purchased a new computer for his consulting practice on October 15 ^th 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 deduction with respect to the computer during the current year?

Accepted Answer

The answer of Timothy purchased a new computer for his...

Exam 2: Property Acquisition and Cost Recovery

Which of the following assets is eligible for §179 expensing?

Which of the following would be considered an improvement rather than routine maintenance?

Arlington LLC purchased an automobile for $62,000 on July 5, 2020. What is Arlington's depreciation deduction for 2020 if its business-use percentage is 61 percent? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)

Patin Corporation began business on September 23 rd of the current year. It incurred $40,000 of start-up costs and $60,000 of organizational expenditures. How much total amortization may be deducted in the first year? (Round final answer to the nearest whole number.)

The 200 percent or double declining balance method is allowable for five- and seven-year property.

Cost depletion is available to all natural resource producers.

Taylor LLC purchased an automobile for $55,000 on July 5, 2020. What is Taylor's maximum depreciation deduction for 2020 (including bonus depreciation) if its business use percentage is 100 percent?

Tax depreciation is currently calculated under what system?

Jasmine started a new business in the current year. She incurred $22,000 of start-up costs. How much of the start-up costs can be immediately deducted (excluding amounts amortized over 180 months) for the year?

Bonus depreciation is used as a stimulus tool by tax policy makers.

If the business-use percentage for listed property falls below 50 percent, the only adjustment isthat all future depreciation must be calculated under the straight-line method.

Depreciation is currently computed under the Modified Accelerated Cost Recovery System (MACRS).

Patin Corporation began business on September 23 ^rd of the current year. It incurred $40,000 of start-up costs and $60,000 of organizational expenditures. How much total amortization may be deducted in the first year? (Round final answer to the nearest whole number.)