Question 1

Gribble Corporation acquires the Dibble Corporation for $7,200,000.On appraisal,the assets of Dibble Corporation have a fair market value of $6,800,000.The excess of the purchase price over the fair market value of the assets:

Accepted Answer

The excess of the purchase price over the fair market value of the assets is considered as goodwill, which is amortized over 15 years according to Generally Accepted Accounting Principles (GAAP). Therefore, option B is the best choice in this scenario.

Question 2

Jack did not depreciate one of his machines that cost $40,000 because he had net operating losses for the last two years.Which of the following statements is true?

Accepted Answer

The answer of Jack did not depreciate one of his...

Question 3

Momee Corporation,a calendar-year corporation,bought only one asset in 2010,a crane it purchased for $700,000 on November 24.It disposed of the asset in April,2015.What is its depreciation deduction for this asset in 2015 if cost recovery was determined using only regular MACRS?

Accepted Answer

($700,000 x .0873 x 4.5/12)

Question 4

During the year,Garbin Corporation (a calendar-year corporation that manufactures furniture)purchased the following assets:  In computing depreciation of these assets,which of the following averaging conventions will be used?

Accepted Answer

half year for tools and machines; mid-month for realty.

Question 5

Joe started a new business this year.He had purchased a computer two years ago for $4,000 and decided to use it in his business until he could afford a new system.He could purchase a new computer with the same specifications for $1,800,but his used computer is worth only $1,100.What is his computer's basis for depreciation?

Accepted Answer

The answer of Joe started a new business this year.He...

Question 6

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015:  All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.If YumYum does not use Section 179 expensing and it elects to use straight-line depreciation on all of its assets,how much is its 2015 depreciation deduction?

Accepted Answer

(850,000 x 0.02033 = $17,281)+ ([$120,000 + $25,000] x .0714 = $10,353)
([$30,000 + $45,000] x .10 = $7,500)= $35,134.

Question 7

The adjusted basis of an asset is:

Accepted Answer

The adjusted basis of an asset is the original cost of the asset minus any deductions such as depreciation or amortization taken over its life. Therefore, option B, which states acquisition cost less cost recovery (depreciation), is the correct answer. Options A, C, and D are incorrect as they do not factor in any deductions taken for the asset over its life.

Question 8

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015:  All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.What is YumYum's Section 179 deduction for 2015?

Accepted Answer

Sec.179 expensing limited to $5,000 ($225,000 - $45,000 - $25,000 - $120,000 - $30,000).

Question 9

The after-tax cost of an asset increases if

Accepted Answer

The answer of The after-tax cost of an asset increases...

Question 10

Peter received his uncle's coin collection as a gift when it was valued at $150,000.Over the years,the uncle had purchased the coins for a total of $75,000.The uncle paid a $15,000 gift tax on the gift.What is Peter's basis in the coin collection?

Accepted Answer

($75,000 + [$75,000/$150,000 x $15,000])

Question 11

Useful lives for realty include all of the following except:

Accepted Answer

The answer of Useful lives for realty include all of...

Question 12

Conrad Corporation has a June 30 year end.What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

Accepted Answer

October is in the second quarter of its fiscal year.

Question 13

What is the maximum amount that can be spent on depreciable personalty in the last quarter of 2015 to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters ?

Accepted Answer

$240,000/.6 = $400,000; $400,000 x .4 = $160,000.

Question 14

MACRS means

Accepted Answer

MACRS stands for Modified Accelerated Cost Recovery System, which is a depreciation method used for tax purposes in the United States. It was introduced by the Tax Reform Act of 1986 and replaced the previous Accelerated Cost Recovery System (ACRS). MACRS allows for the accelerated depreciation of assets over a specified number of years, which can result in significant tax savings for businesses.

Question 15

The only acceptable convention for MACRS realty is

Accepted Answer

The only acceptable convention for MACRS realty is mid-month. This means that assets are assumed to be placed in service in the middle of the month for depreciation purposes, regardless of the actual date they are placed in service. This convention is applied to both the depreciation calculation and the determination of the half-year convention for the first year of depreciation.

Question 16

On June 20,2015 Baker Corporation (a calendar-year taxpayer)acquired 5-year equipment cost $30,000 and on October 28,2015,it acquired 7-year equipment cost $160,000.Baker did not elect Section 179 expensing and no other assets were acquired during the year.Baker's depreciation for 2015 is:
a.$28,864
b.$27,152
c.$13,212
d.$7,212

Accepted Answer

The answer of On June 20,2015 Baker Corporation (a calendar-year...

Question 17

Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?

Accepted Answer

($400,000/$2,600,000)x $1,820,000 = $280,000.

Question 18

All of the following are acceptable conventions for MACRS property except:

Accepted Answer

Mid-week is not an acceptable convention for MACRS property. The other options (mid-month, mid-quarter, and half-year) are all acceptable conventions.

Question 19

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015:  All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.If YumYum Corporation made all elections available to maximize its overall depreciation deduction for 2015.What is YumYum's maximum depreciation deduction for the office building in 2015?

Accepted Answer

($850,000 x .02033)= $17,281.

Question 20

Gregory Corporation,a calendar-year corporation,purchased an office building in March of year 1.In September of year 17,it sold the building.What fraction must be applied to the MACRS percentage to determine the year 17 depreciation?

Accepted Answer

The answer of Gregory Corporation,a calendar-year corporation,purchased an office building...

Quiz 6: Property Acquisitions and Cost Recovery Deductions