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 amount of expenditures incurred is $280,000. If we elect a 60 month deferral and amortization period, the yearly amortization expense would be $280,000/60 = $4,666.67.
Since benefits from the project began being realized in May, we can take 8 months of amortization expense for the current year (May through December).
8 months x $4,666.67 = $37,333.36
Thus, the amount of the deduction for the current year is $37,333.36 x 1.4 (for the 40% tax rate) = $50,400. Therefore, the correct answer is B) $50,400.

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