FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req A
Req C
What is eSys Answers' basis in each of its assets at the end of Year 2?
Adjusted Basis
Year 2 Cost Year 2 Ending
Recovery
Immediate
Year 1 Cost
Original
Basis
Asset
Expense
Recovery
Basis
15,000
10,000
3,000
7.000
18,000
4.000
10,000
Ti000
Computer Equipment
Office Equipment
Furniture
Start-up costs
Van
Pinball machine
Customer List
Totals
< Req A
Req C >
![(The following information applies to the questions displayed below.]
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:
Year 1 Assets
Purchase Date
Basis
Computers (5-year)
Office equipment (7-year)
Furniture (7-year)
Start-up costs
October 30, Year 1
October 30, Year 1
$ 15,000
10,000
October 30, Year 1
October 30, Year 1
3,000
17,000
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 $10,000, and the sale was completed on April 30. During their
summer break, Dallin 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 $15,000 and spent $3,000 getting it ready to put into
service. The pinball machine cost $4,000 and was placed in service on July 1, Year 2.
Year 2 Assets
Basis
$ 18,000
Purchase Date
Van
June 15, Year 2
Pinball machine (7-year)
July 1, Year 2
April 30, Year 2
4,000
10,000
Customer list
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.) (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?
Complete this question by entering your answers in the tabs below.
Req A
Req C
What are the maximum cost recovery deductions for eSys Answers for Year 1 and Year 2?
Recovery
Deduction
Year 1
Year 2](https://content.bartleby.com/qna-images/question/8f2227d8-952c-4300-af5c-721c2b0b48ba/c1c7b8d1-354a-478a-a581-3b46c0656dba/dbcpkc7_processed.jpeg)
Transcribed Image Text:(The following information applies to the questions displayed below.]
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:
Year 1 Assets
Purchase Date
Basis
Computers (5-year)
Office equipment (7-year)
Furniture (7-year)
Start-up costs
October 30, Year 1
October 30, Year 1
$ 15,000
10,000
October 30, Year 1
October 30, Year 1
3,000
17,000
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 $10,000, and the sale was completed on April 30. During their
summer break, Dallin 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 $15,000 and spent $3,000 getting it ready to put into
service. The pinball machine cost $4,000 and was placed in service on July 1, Year 2.
Year 2 Assets
Basis
$ 18,000
Purchase Date
Van
June 15, Year 2
Pinball machine (7-year)
July 1, Year 2
April 30, Year 2
4,000
10,000
Customer list
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.) (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?
Complete this question by entering your answers in the tabs below.
Req A
Req C
What are the maximum cost recovery deductions for eSys Answers for Year 1 and Year 2?
Recovery
Deduction
Year 1
Year 2
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