chool work in information systems, mpany called eSys Answers. During year 1, the sets Purchase Date
chool work in information systems, mpany called eSys Answers. During year 1, the sets Purchase Date
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
(The following information applies to the questions displayed below]
While completing undergraduate school work in information systems, Dallin Bourne and Michael Banks decided to start a
technology support company called eSys Answers. During year 1, they bought the following assets and incurred the
following start-up fees:
Year 1 Assets
Computers (5-year)
Office equipment (7-year)
Furniture (7-year)
Start-up costs
Purchase Date
October 30, Year 1
October 30, Year 1
October 30, Year 1
October 30, Year 1
Basis
$17,800
10,000
8,600
22,040
In April of year 2, they decided to purchase a customer list from a company providing virtually the same services, started
by fellow information systems students preparing to graduate. The customer list cost $15,040, and the sale was completed
on April 30. During their summer break, Dallin and Michael passed on internship opportunities in an attempt to really grow
their business into something they could do full time after graduation. In the summer, they purchased a small van (for
transportation, not considered a luxury auto) and a pinball machine (to help attract new employees). They bought the van
on June 15, Year 2, for $43,000 and spent $5.800 getting it ready to put into service. The pinball machine cost $6,800
and was placed in service on July 1, Year 2.
Year 2 Assets
Purchase Date
Van
Pinball machine (7-year)
Customer 1ist
June 15, Year 2
July 1, Year 2
April 30, Year 2
Basis
$ 48,800
6,800
15,04e
Assume that eSys Answers does not claim any 5179 expense or bonus depreciation. (Use MACRS Table 1. Table 2. Table 3,
Table 4 and Table 5) (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Required:
a. What are the maximum cost recovery deductions for eSys Answers for Year 1 and Year 2?
c. What is eSys Answers' basis in each of its assets at the end of Year 2?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc49831d6-ec90-4028-a4a9-2de76316df7b%2Ff2ccbaac-0d65-4c35-b90b-415c608fda6a%2Fe8hqw4l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
(The following information applies to the questions displayed below]
While completing undergraduate school work in information systems, Dallin Bourne and Michael Banks decided to start a
technology support company called eSys Answers. During year 1, they bought the following assets and incurred the
following start-up fees:
Year 1 Assets
Computers (5-year)
Office equipment (7-year)
Furniture (7-year)
Start-up costs
Purchase Date
October 30, Year 1
October 30, Year 1
October 30, Year 1
October 30, Year 1
Basis
$17,800
10,000
8,600
22,040
In April of year 2, they decided to purchase a customer list from a company providing virtually the same services, started
by fellow information systems students preparing to graduate. The customer list cost $15,040, and the sale was completed
on April 30. During their summer break, Dallin and Michael passed on internship opportunities in an attempt to really grow
their business into something they could do full time after graduation. In the summer, they purchased a small van (for
transportation, not considered a luxury auto) and a pinball machine (to help attract new employees). They bought the van
on June 15, Year 2, for $43,000 and spent $5.800 getting it ready to put into service. The pinball machine cost $6,800
and was placed in service on July 1, Year 2.
Year 2 Assets
Purchase Date
Van
Pinball machine (7-year)
Customer 1ist
June 15, Year 2
July 1, Year 2
April 30, Year 2
Basis
$ 48,800
6,800
15,04e
Assume that eSys Answers does not claim any 5179 expense or bonus depreciation. (Use MACRS Table 1. Table 2. Table 3,
Table 4 and Table 5) (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Required:
a. What are the maximum cost recovery deductions for eSys Answers for Year 1 and Year 2?
c. What is eSys Answers' basis in each of its assets at the end of Year 2?
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