Required information [The following information applies to the questions displayed below.] Bob and Michael started a technology support company called eSys Answers. During year 1, they bought the following assets (placed in service on date of purchase) and incurred the following start-up fees: Year 1 AssetsPurchase DateBasisComputers (5-year)October 30, Y1$15,000Office equipment (7-year)October 30, Y1 10,000Furniture (7-year)October 30, Y1 3,000Start-up costsOctober 30, Y1 17,000 In year 1, they elected to expense the start-up costs to the maximum extent possible. Note: immediate expensing reduces basis. On April 30, year 2, they purchased a customer list (a Section 197 intangible) for $10,000 from a company providing virtually the same services. During the summer of year 2, they purchased a small van (for transportation, not considered a luxury auto) and a business-use machine (7-year life). They bought the van and placed it in service on June 15, Y2, for $18,000. The machine cost $4,000 and was placed in service on July 1, Y2. Year 2 AssetsPurchase DateBasisVanJune 15, Y2$18,000Machine (7-year)July 1, Y2 4,000Customer listApril 30, Y2 10,000 Assume that eSys Answers does not claim any §179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Required: a. What are the maximum cost recovery deductions for eSys Answers for Y1 (including immediate expensing) and Y2? Note: start with completing the table for Part C. Year 1 maximum cost recovery will be the Immediate Expense column total (C10) plus the Year 1 Cost Recovery column total (D10). Year 2 maximum cost recovery will be the Year 2 Cost Recovery column total (E10).c. What is eSys Answers’s basis in each of its assets at the end of Y2? ### Understanding Asset Basis At the End of Year 2For educational purposes, we will analyze the asset basis of eSys Answers at the end of the second year. The table provided helps illustrate the systematic approach to determining the basis of each asset. Let's delve into the table's structure and examine its components:#### Table Overview:The table is divided into several columns and rows, each representing different aspects and types of assets. It is focused on calculating the "Adjusted Basis" of various assets by considering immediate expenses and cost recovery over two years.#### Columns:- **Asset:** Lists different types of assets owned.- **Original Basis:** The initial cost of an asset when purchased.- **Immediate Expense:** Any expenses immediately assigned to each asset.- **Year 1 Cost Recovery:** Deductions or depreciations in the first year.- **Year 2 Cost Recovery:** Deductions or depreciations in the second year.- **Yr 2 Ending Basis:** The remaining value of the asset at the end of the second year after all recoveries.#### Rows:Each row represents a specific type of asset, such as:- **Computer Equipment**- **Office Equipment**- **Furniture**- **Start-up costs**- **Van**- **Pinball machine**- **Customer List**#### Totals Row:At the bottom, there is a row for totals, which aggregates the monetary values across all assets for each column.#### Insights and Calculations:By following the steps outlined below, one can evaluate the adjusted basis for assets at the end of the second year:1. **Original Basis:** Begin with the initial cost assessment of each asset.2. **Immediate Expense:** Subtract any expenses applied immediately.3. **Year 1 Cost Recovery:** Deduct the value recovered through depreciation or other methods in the first year.4. **Year 2 Cost Recovery:** Deduct the value recovered through depreciation or other methods in the second year.5. **Yr 2 Ending Basis:** Obtain the ending balance by subtracting the immediate expense, Year 1, and Year 2 cost recoveries from the original basis.#### Current Table Status:- As of now, all fields in the table are empty ($0), indicating that there haven't been any entries or calculations performed for these assets yet.This table serves as a framework for accounting professionals to track and adjust the value of assets over time. It illustrates the importance of accurate tracking and reporting in financial ---### Maximum Cost Recovery Deductions: eSys Answers for Y1 and Y2**Recovery Deductions Overview:** This section provides information on the maximum cost recovery deductions for eSys Answers for the years Y1 and Y2.**Recovery Deductions Table:**| | **Recovery deductions** ||-------|---------------------------|| **Y1** | || **Y2** | |**Explanation on Graph/Table:**The above table has two columns:- **Column 1:** Lists the years Y1 and Y2 for which the cost recovery deductions are to be calculated.- **Column 2:** Labeled "Recovery deductions", represents the maximum cost recovery deductions for the corresponding years Y1 and Y2. The specific values for these deductions need to be filled as part of the analysis.In your analysis, please ensure to calculate and input the correct values for maximum cost recovery deductions for both Year 1 (Y1) and Year 2 (Y2).**Note:** The tabs "Req A" and "Req C" at the top suggest jumping to different requirement sections which may contain additional context or necessary steps to determine the deductions.---

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Description: Required information [The following information applies to the questions displayed below.] Bob and Michael started a technology support company called eSys Answers. During year 1, they bought the following assets (placed in service on date of purchas

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[The following information applies to the questions displayed below.] Bob and Michael started a technology support company called eSys Answers. During year 1, they bought the following assets (placed in service on date of purchase) and incurred the following start-up fees: Year 1 Assets Purchase Date Basis Computers (5-year) October 30, Y1 $ 15,000 Office equipment (7-year) October 30, Y1 10,000 Furniture (7-year) October 30, Y1 3,000 Start-up costs October 30, Y1 17,000 In year 1, they elected to expense the start-up costs to the maximum extent possible. Note: immediate expensing reduces basis. On April 30, year 2, they purchased a customer list (a Section 197 intangible) for $10,000 from a company providing virtually the same services. During the summer of year 2, they purchased a small van (for transportation, not considered a luxury auto) and a business-use machine (7-year life). They bought the van and placed it in service on June 15, Y2, for $18,000. The machine cost $4,000 and was placed in service on July 1, Y2. Year 2 Assets Purchase Date Basis Van June 15, Y2 $ 18,000 Machine (7-year) July 1, Y2 4,000 Customer list April 30, Y2 10,000 Assume that eSys Answers does not claim any §179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Required: a. What are the maximum cost recovery deductions for eSys Answers for Y1 (including immediate expensing) and Y2? Note: start with completing the table for Part C. Year 1 maximum cost recovery will be the Immediate Expense column total (C10) plus the Year 1 Cost Recovery column total (D10). Year 2 maximum cost recovery will be the Year 2 Cost Recovery column total (E10). c. What is eSys Answers’s basis in each of its assets at the end of Y2?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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.]

Bob and Michael started a technology support company called eSys Answers. During year 1, they bought the following assets (placed in service on date of purchase) and incurred the following start-up fees:

Year 1 Assets	Purchase Date	Basis
Computers (5-year)	October 30, Y1	$	15,000
Office equipment (7-year)	October 30, Y1		10,000
Furniture (7-year)	October 30, Y1		3,000
Start-up costs	October 30, Y1		17,000

In year 1, they elected to expense the start-up costs to the maximum extent possible. Note: immediate expensing reduces basis.

On April 30, year 2, they purchased a customer list (a Section 197 intangible) for $10,000 from a company providing virtually the same services. During the summer of year 2, they purchased a small van (for transportation, not considered a luxury auto) and a business-use machine (7-year life). They bought the van and placed it in service on June 15, Y2, for $18,000. The machine cost $4,000 and was placed in service on July 1, Y2.

Year 2 Assets	Purchase Date	Basis
Van	June 15, Y2	$	18,000
Machine (7-year)	July 1, Y2		4,000
Customer list	April 30, Y2		10,000

Assume that eSys Answers does not claim any §179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Required:

a. What are the maximum cost recovery deductions for eSys Answers for Y1 (including immediate expensing) and Y2? Note: start with completing the table for Part C. Year 1 maximum cost recovery will be the Immediate Expense column total (C10) plus the Year 1 Cost Recovery column total (D10). Year 2 maximum cost recovery will be the Year 2 Cost Recovery column total (E10).
c. What is eSys Answers’s basis in each of its assets at the end of Y2?

### Understanding Asset Basis At the End of Year 2

For educational purposes, we will analyze the asset basis of eSys Answers at the end of the second year. The table provided helps illustrate the systematic approach to determining the basis of each asset. Let's delve into the table's structure and examine its components:

#### Table Overview:

The table is divided into several columns and rows, each representing different aspects and types of assets. It is focused on calculating the "Adjusted Basis" of various assets by considering immediate expenses and cost recovery over two years.

#### Columns:
- **Asset:** Lists different types of assets owned.
- **Original Basis:** The initial cost of an asset when purchased.
- **Immediate Expense:** Any expenses immediately assigned to each asset.
- **Year 1 Cost Recovery:** Deductions or depreciations in the first year.
- **Year 2 Cost Recovery:** Deductions or depreciations in the second year.
- **Yr 2 Ending Basis:** The remaining value of the asset at the end of the second year after all recoveries.

#### Rows:
Each row represents a specific type of asset, such as:
- **Computer Equipment**
- **Office Equipment**
- **Furniture**
- **Start-up costs**
- **Van**
- **Pinball machine**
- **Customer List**

#### Totals Row:
At the bottom, there is a row for totals, which aggregates the monetary values across all assets for each column.

#### Insights and Calculations:
By following the steps outlined below, one can evaluate the adjusted basis for assets at the end of the second year:

1. **Original Basis:** Begin with the initial cost assessment of each asset.
2. **Immediate Expense:** Subtract any expenses applied immediately.
3. **Year 1 Cost Recovery:** Deduct the value recovered through depreciation or other methods in the first year.
4. **Year 2 Cost Recovery:** Deduct the value recovered through depreciation or other methods in the second year.
5. **Yr 2 Ending Basis:** Obtain the ending balance by subtracting the immediate expense, Year 1, and Year 2 cost recoveries from the original basis.

#### Current Table Status:
- As of now, all fields in the table are empty ($0), indicating that there haven't been any entries or calculations performed for these assets yet.

This table serves as a framework for accounting professionals to track and adjust the value of assets over time. It illustrates the importance of accurate tracking and reporting in financial

---

### Maximum Cost Recovery Deductions: eSys Answers for Y1 and Y2

**Recovery Deductions Overview:**
This section provides information on the maximum cost recovery deductions for eSys Answers for the years Y1 and Y2.

**Recovery Deductions Table:**

| | **Recovery deductions** |
|-------|---------------------------|
| **Y1** | |
| **Y2** | |

**Explanation on Graph/Table:**

The above table has two columns:
- **Column 1:** Lists the years Y1 and Y2 for which the cost recovery deductions are to be calculated.
- **Column 2:** Labeled "Recovery deductions", represents the maximum cost recovery deductions for the corresponding years Y1 and Y2. The specific values for these deductions need to be filled as part of the analysis.

In your analysis, please ensure to calculate and input the correct values for maximum cost recovery deductions for both Year 1 (Y1) and Year 2 (Y2).

**Note:** The tabs "Req A" and "Req C" at the top suggest jumping to different requirement sections which may contain additional context or necessary steps to determine the deductions.

---

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