Ch 9 HW Solutions

Ch 9 HW Solutions - Chapter 9 Selected Homework Solutions...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 9 Selected Homework Solutions 22. Determine the adjusted basis of each of the following assets: a. Leineia purchased an automobile two years ago for $30,000. She uses it 75% in her business and 25% for personal use. To date, she has deducted $4,209 in allowable depreciation on the business use portion of the automobile. Because the automobile is a mixed-use asset, the business basis and the personal use basis must be kept separately. The initial basis allocation is based on the percentage of business and personal use. The business portion of the automobile is depreciable and depreciation deductions will reduce its basis: 100% 75% 25% Total Business Use Personal Use Initial Basis $30,000 $22,500 $7,500 Less: Depreciation (4,209 ) (4,209 ) -0- Adjusted Basis $25,791 $18,291 $7,500 b. Three years ago, Quon purchased an office building for $330,000. The purchase price was properly allocated as $250,000 to the building and $80,000 to the land. The building remodeling cost $8,000. He paid $12,000 for the installation of a parking lot and sidewalks. Insurance premiums on the building are $5,000 per year. He has deducted total allowable depreciation on the building of $70,620 and $1,000 on the land improvements for the three years. The adjusted basis of the land and the building must be determined separately because the building is subject to depreciation while the land is not. The land improvements must be accounted for separately since the depreciable life for the improvements is shorter than the depreciable life of the building. The property taxes and the insurance premiums of $5,000 are expensed in the current year. The adjusted basis of each is: Building Land Land Improvements Original Cost $250,000 $80,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Remodeling cost 8,000 Parking lot and sidewalks $12,000 Depreciation (70,620 ) (1,000 ) Adjusted basis $187,380 $80,000 $11,000 23. Determine the adjusted basis of each of the following assets: a. André purchases a parcel of land three years ago at a cost of $17,000. In the current year, the adjoining property owner sues him, claiming that part of André's property belongs to him under the right of adverse possession. André incurs $4,000 in legal fees successfully defending against the lawsuit. He pays annual property taxes of $300 on the land and has paid $3,700 in interest on the loan he took out to acquire the property. The adjusted basis is equal to the $17,000 initial basis plus the $4,000 of legal fees to defend title to the property (an expenditure that benefits beyond the current period) for a total of $21,000. The property taxes and interest are current period expenditures that are deducted in the period they are paid. b. René purchases 1,000 shares of Cramdem Company common stock for $8
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 11

Ch 9 HW Solutions - Chapter 9 Selected Homework Solutions...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online