1- The Nandina Corporation was formed and began operations on July 1, 2016, and
ID: 2560822 • Letter: 1
Question
1- The Nandina Corporation was formed and began operations on July 1, 2016, and incurred the following expenses during the year:
If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2016?
a.$20
b.$120
c.$3,600
d.$240
e.None of these choices are correct.
2- Terry forms the Camphor Corporation during the current year. She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation. Terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. If the fair market value of the stock received by Terry is $450,000, what is the corporation's basis in the property received from Terry?
a.$450,000
b.$700,000
c.$400,000
d.$275,000
e.$125,000
State fees for incorporation $ 800 Legal and accounting fees incident to organization 1,700 Legal fees for the issuance of stock 600 Temporary directors' fees 1,100Explanation / Answer
1. Correct option is $120
Working: State fees = $800
Add: Legal and accounting fees = 1,700
Add: Temporary directors fees = 1,100
Total = $3,600
Monthly amortization = 3600 / 180 = $20
For 6 months of 2016 = 20 x 6 = $120
2. Correct option is $125,000
Adjusted basis of Terry= $400,000
Less: Mortgage assumed = $275,000
Corporation’s basis in the property = $125,000
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