Chapter 7.docx - Chapter 7 4 Adjusted tax basis = $25,000...

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Chapter 7 4. Adjusted tax basis = $25,000 + $80,000 + $2,000 + $7,000 - $56,000 = $58,000 5. a. Deferred tax asset = $52,000 * 35%= $18,200 b. The temporary difference will reverse in the year that ZeZe disposes of the land. 10. Book Tax Direct material cost $200,000 $200,000 Direct labor cost 130,000 130,000 Indirect costs 85,000 116,000 Total cost of 1,000 units $415,000 $446,000 Cost of ending inventory (260 units) (107,900) (115,960) Cost of goods sold (740 units) $307,100 $330,040 14. a. Herelt’s MACRS depreciation for 2017: $383,600 * 14.29% = $54,816 Herelt’s MACRS depreciation for 2018: $383,600 * 24.49% = $93,944 b. Adjusted basis = $383,600 - $54,816 - $93,944 = $234,840 c. Depreciation = 50% * ($383,600 * 17.49%) = $33,546 21. 2016: MACRS = 20% * $73,000 = $14,400 Depreciation deduction = $3,160 2017: MACRS = 32% * $73,000 = $23,360 Depreciation deduction = $5,100 2018: MACRS = 19.2% * $73,000 = $14,016 Depreciation deduction = $3,050 25. a. In 2014, Loni’s Section 179 deduction was limited to $394,100, so its taxable income was zero ($394,100 taxable income before the deduction -$394,100 deduction). Loni’s $105,900 nondeductible expense is carried forward. b. In 2015, the maximum 179 deduction is $500,000. Loni’s Section
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179 deduction is $129,600, consisting of $23,700 expense for 2015 + $105,900 carryforward from 2014, and its taxable income is $98,400 ($228,000 taxable income before the deduction - $25,000 deduction).
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