Essay about quiz 8

668 WordsOct 23, 20143 Pages
Accounting 430 - Quiz 8 1) Assuming a 25 percent tax rate, compute the after-tax cost of $23,000 worth of advertising costs. (part c) a) $23,000 b) $20,125 c) $17,250 Because the advertising cost is deductible, its after-tax cost is $17,250 ($23,000 - [$23,000 × 25%]). d) $27,500 2) In 2013, Firm A paid $50,000 cash to purchase a tangible business asset. In 2013 and 2014, it deducted $3,140 and $7,200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 35 percent. Compute Firm A’s adjusted basis in the asset at the end of each year. (part b) a) 2013: $39,660; 2014: $29,320 b) 2013: $46,860; 2014: $39,660 Initial cost basis$50,000 Year 1 depreciation (3,140) Adjusted basis at end of…show more content…
BookTax Direct material cost$200,000$200,000 Direct labor cost130,000130,000 Indirect costs 85,000116,000 Total cost of 1,000 units$415,000$446,000 Cost of ending inventory (260 units)(107,900)(115,960) Cost of goods sold (740 units)$307,100$330,040 [$415,000/1,000 = $415 each unit of inventory (book)] [$446,000/1,000 = $446 each unit of inventory (tax)] c) Book: $107,900; Tax: $115,960 d) Book: $350,400; Tax: $298,700 5) Herelt Inc., a calendar year taxpayer, purchased equipment for $383,600 and placed it in service on April 1, 2014. The equipment was seven-year recovery property, and Herelt used the half-year convention to compute MACRS depreciation. Compute Herelt’s MACRS depreciation for 2016 if it disposes of the equipment on February 9, 2016. (part c) a) $25,483 b) $67,092 c) $42,421 d) $33,546 Herelt’s MACRS depreciation for the year of disposition is based on the half-year convention. Thus, 2016 depreciation is $33,546 (50% [$383,600 × 17.49%]). 6) The Section 179 expense election applies to what type of assets? a) Only startup expenses. b) Intangible assets. c) Depreciable personalty. d) Only residential real property. 7) Start-up costs may be only partially deductible in the year incurred, but expansion costs are fully deductible in the year incurred. a) True b) False 8) Bonus depreciations allows the purchaser of qualified
Open Document