ACC330_Exam3 - ACCOUNTING 330 EXAM III PART I SPRING 2011...

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ACCOUNTING 330 - EXAM III - PART I - SPRING 2011 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in February of the following year. No assets were purchased in the following year. Grape Corporation’s cost recovery would begin: a. In the current year using a mid-quarter convention. b. In the current year using a half-year convention. c. In the following year using a mid-quarter convention. d. In the following year using a half-year convention.** e. None of the above. ____ 2. On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago Tab purchased the machine for $70,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery? ____ 3. Tara purchased a machine for $40,000 to be used in her business. The cost recovery allowed and allowable for the three years the machine was used are as follows: Cost Recovery Allowed Cost Recovery Allowable Year 1 $16,000 $ 8,000 Year 2 9,600 12,800 Year 3 5,760 7,680 If Tara sells the machine after three years for $15,000, how much gain should she recognize? ____ 4. Hazel purchased a new business asset (five-year property) on November 30, 2010, at a cost of $100,000. This was the only asset acquired by Hazel during 2010. On January 7, 2011, Hazel placed the asset in service. She did not elect to expense any of the asset cost under § 179, nor did she elect straight-line cost recovery. If Congress reenacts additional first-year depreciation for 2010, Hazel did elect not to take additional first-year depreciation. On October 25, 2012, Hazel sold the asset. Determine the cost recovery for 2012.
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____ 5. James purchased a new business asset (three-year personalty) on July 23, 2010, at a cost of $50,000. He did not elect to expense any of the asset under § 179, nor did he elect straight-line cost recovery. If Congress reenacts additional first-year depreciation for 2010, James did elect not to take additional first-year depreciation. Determine the cost recovery deduction for 2010. a. $8,333. b. $16,665. c. $33,333. d. $41,665. e. None of the above. ____
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