CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 22P
To determine
Indicate whether the given expenditures incurred during the current year should be treated as a repair expense or capitalized and
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The following expenditures were incurred in connection with a new machine acquired by a metals manufacturing company.Identify those that should be included in the cost of the asset.(a) Freight charges, (b) sales tax on the machine, (c) payment to a passing motorist whosecar was damaged by the equipment used in unloading the machine, (d) wages of employees for time spent in installing and testing the machine before it was placed in service, (e) wages of employees assigned to lubricate and makeminor adjustments to the machine one year after it was placed in service
Karen incurred the following expenditures in connection with her residential rental property: paved driveway, installed new kitchen cabinets, and had a new roof put on the structure.
Which of these should be capitalized?
Classify each of the following as: Extraordinary Repairs, Asset Improvements or Ordinary Maintence and Repairs
Overhauling an engine in a large truck
Exterior and interior painting
Paving a new parking lot
New landscaping
Installing a new air conditioning system in an old building
Resurfacing a pool in an apartment building
Adding refrigerant to an air conditioning system
Fixing damage due to a car accident
Knowledge Booster
Similar questions
- Addition of a sprinkler system to the manufactoring facility to reduce the risk of fire damage, $36,700 would be an expense in the period occured or would be capitalized and depreciated over the useful life of the asset?arrow_forwardIndicate whether each of the following expenditures should be classified as land (L), land improvements (LI), buildings (B), equipment (E), or none of these (X). _____ 1. Parking lots _____ 2. Electricity used by a machine _____ 3. Interest on building construction loan _____ 4. Cost of trial runs for machinery _____ 5. Drainage costs _____ 6. Cost to install a machine _____ 7. Fences _____ 8. Unpaid (past) property taxes assumed _____ 9. Cost of tearing down a building when land and a building on it are purchasedarrow_forwardIdentify the following expenditures as capital expenditures or revenue expenditures. (a) Replacement of worn out gears on factory machinery. (b) Construction of a new wing on an office building. (c) Painting the exterior of a building. (d) Oil change on a company truck. (e) Replacing an old computer chip with a faster chip, which increases productive capacity. No extension of useful life expected. (f) Overhaul of a truck motor. One year extension in useful life is expected. (g) Purchased a wastebasket at a cost of $10. (h) Painting and lettering of a used truck upon acquisition of the truck.arrow_forward
- Identify the following expenditures as capital expenditures or revenue expenditures:a. Immediately after acquiring a new delivery truck, paid $195 to have the name of the store andother advertising material painted on the vehicle.b. Painted delivery truck at a cost of $450 after two years of use.c. Purchased new battery at a cost of $40 for two-year-old delivery truck.d. Installed an escalator at a cost of $17,500 in a three-story building that had been used for someyears without elevators or escalators.e. Purchased a pencil sharpener at a cost of $15.00. f. Original life of the delivery truck had been estimated at four years, and straight-line deprecia-tion of 25 percent yearly had been recognized. After three years’ use, however, it was decided to recondition the truck thoroughly, including adding a new engine.arrow_forwardWhich of the following would be considered capital expenditures (debit to an asset)? Sales tax on the purchase of equipment Purchase of cleaning supplies to clean the company's microwave A special concrete foundation that was poured specifically for a new piece of equipment Installation costs for installing a new piece of equipment General maintenance costs for a piece of equipment that has been in service for ten years Routine oil change for a van Repair of damage incurred on a new piece of equipment while the new equipment was being brought into the company's office Attorney's fees incurred to review the purchase agreement for a new piece of equipment Installation of a parking lot around a retail buildling Freight costs for the delivery of a purchased used printing pressarrow_forwardTo what extent do you consider the following items to be proper costs of the fixed asset? Give reasons for your opinions. a. Overhead of a business that builds its own equipment. b. Cash discounts on purchases of equipment. c. Interest paid during construction of a building. d. Cost of a safety device installed on a machine. e. Freight on equipment returned before installation, for replacement by other equipment of greater capacity. f. Cost of moving machinery to a new location. g. Cost of plywood partitions erected as part of the remodeling of the office. h. Replastering of a section of the building. i. Cost of a new motor for one of the trucks.arrow_forward
- For each property type below, find the correct property class and enter the number of years the property is depreciated over. Water Taxi Truck WWT Plant Computer Specialty Toolsarrow_forwardGallon Auto purchased a neighboring lot for a new building and parking lot. Indicate whether each of the following expenditures is properly charged to (a) Land, (b) Land Improvements, or (c) Buildings:a. Paving costsb. Architects’ fee for building designc. Cost of clearing the propertyd. Cost of the propertye. Building construction costsf. Lights around the propertyg. Building permith. Interest on the construction loanarrow_forwardDuring the current year, Alanna Co. had the following transactions pertaining to its new office building. A. What should Alanna Co. record on its books for the land? The total cost of land includes all costs of preparing the land for use. The demolition cost of the old building is added to the land costs, and the sale of the old building scrap is subtracted from the land cost. B. What should Alanna Co. record on its books for the building?arrow_forward
- Columbia Company incurred the following expenditures related to the land and building: Payment for land and old building 1,750,000 Demolition of old building to prepare the land for the construction of a new building 87,500 Payment to tenants for vacating old building 26,250 Building permit for new construction 52,500 Surveying fee before construction of new building 35,000 Parking lots and driveways (part of building plan) 70,000 Cost of grading, leveling and landfill 78,750 Assessment by city for drainage project 8,750 Construction costs of new building 10,500,000 Temporary quarters for…arrow_forwardWhich of the following is TRUE regarding the depreciation of residential rental property? Taxpayers are required to depreciate such property using the General Depreciation System (GDS). Unimproved land is depreciable over 30 years if the taxpayer intends to construct residential rental units on the land. Depreciation begins on the first day of the calendar year in which such property was placed into service. Taxpayers who use the GDS system depreciate the property over 27.5 years.arrow_forwardAn owner of a Cinema Hall, on ascertaining that a portion of the ceiling of the hall was in need of repairs, decided to replace the whole of the ceiling with different but better materials. The new ceiling, in addition to enhancing the appearance of the hall, improved the acoustics. The total cost of the material and of erecting the new ceiling was $320,000. It was estimated that the cost of repairing the ceiling would have been $220,000. With reference to Income Tax Assessment Act 1997 and relevant case law, discuss the amount, if any, allowable as a deduction for income tax purposes. Kindly use the four sections of:1. Facts of the scenario 2. Relevant laws and cases 3. Application of laws and cases 4. Conclusion (Maximum 800 wordsarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningBusiness Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENTPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College