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 in the development of a new plant process is $360,000 ($300,000 + $60,000). Green Corporation elected a 60-month deferral and amortization period, which means that the deduction will be taken over five years.

The deduction for the current year will be calculated using the half-year convention, which means that only half of the deduction is allowed in the year that benefits from the project began being realized. In this case, benefits began being realized in May, which means that the deduction for the current year will be calculated as follows:

($360,000 ÷ 60) ÷ 2 × 8/12 = $50,400

Therefore, the answer is B.

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