Nicole organized a new corporation. The corporation began business on April 1 of
ID: 2423320 • Letter: N
Question
Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started:
What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 (not including the amount it immediately expensed)? (Round intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)
Expense Date Amount Attorney fees for articles of incorporation February 10 $ 39,500 March 1 – March 30 wages March 30 6,250 March 1 – March 30 rent March 30 2,750 Stock issuance costs April 1 26,000 April 1 – May 30 wages May 30 15,625What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 (not including the amount it immediately expensed)? (Round intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)
Explanation / Answer
Answer:The corporation will deduct amortization expense of $1,725 for organizational expenditures and $200 of amortization for start-up costs,
Start-up costs Description Amount Explanation (1) Maximum immediate expense 5000 §195(b)(1)(ii) (2) Total start-up expenditures 9000 Given (3) Phase-out threshold 50000 §195(b)(1)(ii) (4) Immediate expense phase-out 0 (2)-(3) (5) Allowable immediate expense 5000 (1)-(4) (6) Remaining organizational expenditures 4000 (2)-(5) (7) Recovery period in months 180 15 years §195(b)(1)(B) (8) Monthly straight-line amortization 22.22222 (6)/(7) (9) Teton business months during year 1 9 April through december Year 1 straight-line amortization for start-up costs 200 (8)*(9) Organizational expenditures Description Amount Explanation (1) Maximum immediate expense 5000 §248(a)(1) (2) Total organizational expenditures 39500 Given (3) Phase-out threshold 50000 §248(a)(1)(B) (4) Immediate expense phase-out 0 (2)-(3) (5) Allowable immediate expense 5000 (1)-(4) (6) Remaining organizational expenditures 34500 (2)-(5) (7) Recovery period in months 180 15 years §248(a)(2) (8) Monthly straight-line amortization 191.6667 (6)/(7) (9) Teton business months during year 1 9 April through december Year 1 straight-line amortization for organizational expenditures 1725 (8)*(9)Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.