Question 1

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.

Accepted Answer

A) True 
 B)False  True

Question 2

An example of an asset that is both personal-use and personal property is:

Accepted Answer

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 the assets are personal-use and personal property. C

Question 3

Which of the allowable methods allows the most accelerated depreciation?

Accepted Answer

A)  150 percent declining balance.
B)  200 percent declining balance.
C)  Straight-line.
D)  Sum-of-the-years-digits.
E)  None of the methods would allow accelerated depreciation. B

Question 4

The alternative depreciation system requires both a slower method of recovery and longer recovery periods.

Accepted Answer

A) True 
 B)False

Question 5

-Sairra,LLC purchased only one asset during the current year (a full 12-month tax 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? (ignoring §179 and bonus depreciation).(Use MACRS Table 1)(Round final answer to the nearest whole number.)

Accepted Answer

A)  $1,786.
B)  $3,573.
C)  $4,463.
D)  $5,000.
E)  None of the choices are correct.

Question 6

-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).(Use MACRS Table 1)

Accepted Answer

The answer of 
-Eddie purchased only one asset during the...

Question 7

IN THE TEXT
-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.(Use MACRS Table 5)  EXHIBIT 10-6

Accepted Answer

A)  $641.
B)  $909.
C)  $5,128.
D)  $7,346.
E)  None of the choices are correct.

Question 8

Which is not an allowable method under MACRS?

Accepted Answer

A)  150 percent declining balance.
B)  200 percent declining balance.
C)  Straight-line.
D)  Sum-of-the-years-digits.
E)  All of the choices are allowable methods under MACRS.

Question 9

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? (Round final answer to the nearest whole number.)

Accepted Answer

The answer of PC Mine purchased a platinum deposit for...

Question 10

-Lenter LLC placed in service on April 29,2018 machinery and equipment (7-year property)with a basis of $1,600,000.Assume that Lenter has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing).(Use MACRS Table 1)

Accepted Answer

A)  $228,640.
B)  $1,000,000.
C)  $1,085,740.
D)  $1,120,000.
E)  None of the choices are correct.

Question 11

Alexandra purchased a $55,000 automobile during 2018.The business use was 70 percent.What is the allowable depreciation for the current year (ignore any possible bonus depreciation)? (Use Exhibit 10-10)

Accepted Answer

The answer of Alexandra purchased a $55,000 automobile during 2018.The...

Question 12

-Littman LLC placed in service on July 29,2018 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 2018? (Use MACRS Table 1)

Accepted Answer

A)  Littman should take §179 expense equal to the maximum $1,000,000.
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 the choices are correct.

Question 13

Paulman 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,Paulman received a patent based upon the research being amortized.$36,000 of legal expenses for the patent was incurred.The patent is expected to have a remaining useful life of 17 years.
1) What is the basis of the patent? (Round 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? (Round final answer to the nearest whole number.)

Accepted Answer

The answer of Paulman incurred $55,000 of research and experimental...

Question 14

-Suvi,Inc.purchased two assets during the current year (a full 12-month tax 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 (ignoring §179 and bonus depreciation).(Use MACRS Table 1)(Round final answer to the nearest whole number.)

Accepted Answer

A)  $857.
B)  $3,357.
C)  $5,429.
D)  $6,000.
E)  None of the choices are correct.

Question 15

-Billie Bob purchased a used camera (5-year property)for use in his sole proprietorship in the prior year.The basis of the camera was $2,400.Billie Bob used the camera in his business 60 percent of the time during the first year.During the second year,Billie Bob used the camera 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).(Use MACRS Table 1)

Accepted Answer

A)  $0.
B)  $48.
C)  $192.
D)  $336.
E)  None of the choices are correct.

Question 16

Depletion is the method taxpayers use to recover their capital investment in natural resources.

Accepted Answer

A) True 
 B)False

Question 17

IN THE TEXT
-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.(Use MACRS Table 3)

Accepted Answer

The answer of IN THE TEXT
-During August of the prior...

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

Goodwill and customer lists are examples of §197 amortizable assets.

Accepted Answer

A) True 
 B)False

Question 20

To increase their depreciation deduction on automobiles,taxpayers should elect §179 expense.

Accepted Answer

A) True 
 B)False

Exam 9: Property Acquisition and Cost Recovery

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.

An example of an asset that is both personal-use and personal property is:

Which of the allowable methods allows the most accelerated depreciation?

The alternative depreciation system requires both a slower method of recovery and longer recovery periods.

-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).(Use MACRS Table 1)

Which is not an allowable method under MACRS?

Alexandra purchased a $55,000 automobile during 2018.The business use was 70 percent.What is the allowable depreciation for the current year (ignore any possible bonus depreciation)? (Use Exhibit 10-10)

Depletion is the method taxpayers use to recover their capital investment in natural resources.

IN THE TEXT -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.(Use MACRS Table 3)

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.

Goodwill and customer lists are examples of §197 amortizable assets.

To increase their depreciation deduction on automobiles,taxpayers should elect §179 expense.