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CONCEPTS IN FED.TAX.,2020-W/ACCESS

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 77IIP

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Mr. Y purchased equipment for $60,000 and spent $5,000 on transportation,
$4,000 on installation, and $3,000 on setup costs. The equipment is
depreciated at 12% per annum on written down value method. After 3 years,
the equipment was sold for $42,000, and Mr. Y paid $800 as commission to the
agent. Calculate the profit or loss on the sale of the equipment.

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Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of $1,200, paid installation fees of $2,750, pays annual maintenance cost of $250, and received a 10% discount on sales price. Determine the acquisition cost of the equipment.
Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
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What is the depreciable base of the machine on this accounting question?
Steele Corp. purchases equipment for $21,000. Regarding the purchase, Steele recorded the following transactions: • Paid shipping of $1,200. • Paid installation fees of $2,400. • Pays annual maintenance cost of $260. • Received a 5% discount on $21,000 sales price. Determine the acquisition cost of the equipment.
A company purchased a new forging machineto manufacture disks for airplane turbine engines.The new press cost $3,500,000, and it falls into aseven-year MACRS property class. The companyhas to pay property taxes to the local township forownership of this forging machine at a rate of 1.2%on the beginning book value of each year.(a) Determine the book value of the asset at thebeginning of each tax year.(b) Determine the amount of property taxes over themachine’s depreciable life.
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