Last year,Green Corporation incurred the following expenditures in the development of a new plant process: During the current year,benefits from the project began being realized in May.If Green Corporation elects a 60 month deferral and amortization period,determine the amount of the deduction for the current year.

Question

Last year,Green Corporation incurred the following expenditures in the development of a new plant process:  During the current year,benefits from the project began being realized in May.If Green Corporation elects a 60 month deferral and amortization period,determine the amount of the deduction for the current year.

Quizplus · Accepted Answer

The total cost incurred in the development of a new plant process is $324,000 (i.e. $270,000 + $54,000).

If Green Corporation elects a 60-month deferral and amortization period, the amount of deduction for the current year can be calculated as follows:

Total cost / Deferral period = Annual amortization expense
$324,000 / 60 = $5,400

Since the benefits from the project began being realized in May of the current year, the deduction for the current year would be as follows:

May to December = 8 months
$5,400 x 8/12 = $3,600

Therefore, the amount of the deduction for the current year is $3,600 or option B.

Last Year,Green Corporation Incurred the Following Expenditures in the Development