technology support company called eSys Answers. During year 1, they bought the following assets and incurred the following start-up fees: Purchase Date October 30, Year 1 October 30, Year 1 October 30, Year 1 October 30, Year 1 Basis $16,200 10,000 5,400 19,160 Year 1 Asseta Computers (5-year) office equipment (7-year) Furniture (7-year) Start-up conta In April of year 2, they decided to purchase a customer list from a company providing virtually the same services, starte by fellow information systems students preparing to graduate. The customer list cost $12,160, and the sale was compler on April 30. During their summer break, Dalin and Michael passed on internship opportunities in an attempt to really gr 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 v on June 15, Year 2, for $27,000 and spent $4,200 getting it ready to put into service. The pinball machine cost $5,200 was placed in service on July 1, Year 2. Purchase Date June 15, Year 2 July 1, Year 2 April 30, Year 2 Year 2 Aaseta Van Pinball machine (7-year) Customer list Basis $ 31,200 5,200 12,160 Assume that eSys Answers does not claim any 5179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Tabl.
technology support company called eSys Answers. During year 1, they bought the following assets and incurred the following start-up fees: Purchase Date October 30, Year 1 October 30, Year 1 October 30, Year 1 October 30, Year 1 Basis $16,200 10,000 5,400 19,160 Year 1 Asseta Computers (5-year) office equipment (7-year) Furniture (7-year) Start-up conta In April of year 2, they decided to purchase a customer list from a company providing virtually the same services, starte by fellow information systems students preparing to graduate. The customer list cost $12,160, and the sale was compler on April 30. During their summer break, Dalin and Michael passed on internship opportunities in an attempt to really gr 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 v on June 15, Year 2, for $27,000 and spent $4,200 getting it ready to put into service. The pinball machine cost $5,200 was placed in service on July 1, Year 2. Purchase Date June 15, Year 2 July 1, Year 2 April 30, Year 2 Year 2 Aaseta Van Pinball machine (7-year) Customer list Basis $ 31,200 5,200 12,160 Assume that eSys Answers does not claim any 5179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Tabl.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
Purchase Date
October 30, Year 1
October 30, Year 1
October 30, Year 1
October 30, Year 1
Basis
$16,200
10,000
5,400
19,160
Year 1 Asseta
Computers (5-year)
office equipment (7-year)
Furniture (7-year)
Start-up costa
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 $12,160, and the sale was completed
on April 30. During their summer break, Dailin 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 $27,000 and spent $4,200 getting it ready to put into service. The pinball machine cost $5,200 and
was placed in service on July 1, Year 2.
Year 2 Assets
Purchase Date
Van
Pinball machine (7-year)
Customer list
June 15, Year 2
July 1, Year 2
April 30, Year 2
Basis
$ 31,200
5,200
12,160
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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