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Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2022. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2022: Asset Office furniture Machinery Used delivery truck Cost $ 400,000 1,810,000 90,000 Date Placed in Service 02/03/2022 07/22/2022 08/17/2022 *Not considered a luxury automobile. During 2022, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2023 to increase its production capacity. These are the assets acquired during 2023: Date Placed in Service 03/31/2023 05/26/2023 08/15/2023 11/13/2023 Asset, Computers and information system Luxury auto Assembly equipment Storage building "Used 100% for business purposes. Karane generated taxable income in 2023 of $1,795,000 for purposes of computing the $179 expense limitation. (Use Cost $ 450,000 92,500 1,450,000 800,000

Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2022. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2022: Asset Office furniture Machinery Used delivery truck Cost $ 400,000 1,810,000 90,000 Date Placed in Service 02/03/2022 07/22/2022 08/17/2022 *Not considered a luxury automobile. During 2022, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2023 to increase its production capacity. These are the assets acquired during 2023: Date Placed in Service 03/31/2023 05/26/2023 08/15/2023 11/13/2023 Asset, Computers and information system Luxury auto Assembly equipment Storage building "Used 100% for business purposes. Karane generated taxable income in 2023 of $1,795,000 for purposes of computing the $179 expense limitation. (Use Cost $ 450,000 92,500 1,450,000 800,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2022. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2022: Asset office furniture Machinery Used delivery truck* *Not considered a luxury automobile. During 2022, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2023 to increase its production capacity. These are the assets acquired during 2023: Asset Asset, Computers and information system Luxury auto* Assembly equipment Storage building "Used 100% for business purposes. Karane generated taxable income in 2023 of $1,795,000 for purposes of computing the §179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) Inventory Office furniture Machinery Patent Goodwill Building Land Cost $ 400,000 1,810,000 90,000 d. Now assume that during 2023, Karane decides to buy a competitor's assets for a purchase price of $1,649,500. Compute the maximum 2023 cost recovery, including §179 expense and bonus depreciation. Karane purchased the following assets for the lump- sum purchase price: Note: Round your final answers to the nearest whole dollar amount. Description 2022 Assets Office Furniture Machinery Used Delivery Truck 2023 Assets Machinery Patent Goodwill Building Land Totals Date Placed in Service 02/03/2022 07/22/2022 08/17/2022 Cost $ 270,000 280,000 300,000 243,000 6,500 480,000 70,000 Computers and Information System Luxury Auto Assembly Equipment Storage Building Inventory Office Furniture Cost $ 450,000 92,500 1,450,000 800,000 Date Placed in Service 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 Cost Date Placed in Service 03/31/2023 05/26/2023 08/15/2023 11/13/2023 $ 400,000 $ 1,810,000 90,000 450,000 92,500 Section 179 Expense 1,450,000 800,000 270,000 280,000 300,000 243,000 6,500 480,000 70,000 S 6,742,000 $ 0 0 0 0 1,160,000 0 0 0 0 0 0 0 0 $ Bonus 0 0 0 450,000 8,000 1,450,000 0 0 0 1,020,000 0 0 0 0 MACRS Basis $ 400,000 $ 810,000 90,000 0 84,500 0 800,000 0 280,000 300,000 0 0 480,000 Current MACRS Depreciation 0 1,160,000 $ 2,928,000 $3,244,500 $ 97,960 28,800 0 0 0 0 Current Amortization 126,760 S 0 S 0 0 0 0 0 0 0 0 0 5,400 144 Total Cost Recovery Deduction 0 0 5,544 97,960 0 28,800 450,000 8,000 2,610,000 0 0 0 1,020,000 5,400 144 0 0 $ 4,220,304
Transcribed Image Text:Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2022. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2022: Asset office furniture Machinery Used delivery truck* *Not considered a luxury automobile. During 2022, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2023 to increase its production capacity. These are the assets acquired during 2023: Asset Asset, Computers and information system Luxury auto* Assembly equipment Storage building "Used 100% for business purposes. Karane generated taxable income in 2023 of $1,795,000 for purposes of computing the §179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) Inventory Office furniture Machinery Patent Goodwill Building Land Cost $ 400,000 1,810,000 90,000 d. Now assume that during 2023, Karane decides to buy a competitor's assets for a purchase price of $1,649,500. Compute the maximum 2023 cost recovery, including §179 expense and bonus depreciation. Karane purchased the following assets for the lump- sum purchase price: Note: Round your final answers to the nearest whole dollar amount. Description 2022 Assets Office Furniture Machinery Used Delivery Truck 2023 Assets Machinery Patent Goodwill Building Land Totals Date Placed in Service 02/03/2022 07/22/2022 08/17/2022 Cost $ 270,000 280,000 300,000 243,000 6,500 480,000 70,000 Computers and Information System Luxury Auto Assembly Equipment Storage Building Inventory Office Furniture Cost $ 450,000 92,500 1,450,000 800,000 Date Placed in Service 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 09/15/2023 Cost Date Placed in Service 03/31/2023 05/26/2023 08/15/2023 11/13/2023 $ 400,000 $ 1,810,000 90,000 450,000 92,500 Section 179 Expense 1,450,000 800,000 270,000 280,000 300,000 243,000 6,500 480,000 70,000 S 6,742,000 $ 0 0 0 0 1,160,000 0 0 0 0 0 0 0 0 $ Bonus 0 0 0 450,000 8,000 1,450,000 0 0 0 1,020,000 0 0 0 0 MACRS Basis $ 400,000 $ 810,000 90,000 0 84,500 0 800,000 0 280,000 300,000 0 0 480,000 Current MACRS Depreciation 0 1,160,000 $ 2,928,000 $3,244,500 $ 97,960 28,800 0 0 0 0 Current Amortization 126,760 S 0 S 0 0 0 0 0 0 0 0 0 5,400 144 Total Cost Recovery Deduction 0 0 5,544 97,960 0 28,800 450,000 8,000 2,610,000 0 0 0 1,020,000 5,400 144 0 0 $ 4,220,304
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