Regarding research and experimental expenditures

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College Accounting, Chapters 1-27
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Chapter 16 / Exercise E 16-4B
College Accounting, Chapters 1-27
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68. Regarding research and experimental expenditures, which of the following are notqualified expenditures?a. Costs of ordinary testing of materials.b. Costs to develop a plant process.c. Costs of developing a formula.d. Depreciation on a building used for research.
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College Accounting, Chapters 1-27
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Chapter 16 / Exercise E 16-4B
College Accounting, Chapters 1-27
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Chapter 07 - Deductions And Losses: Certain Business Expenses And Lossese. All of the above are qualified expenditures.ANSWER:
a69. Blue Corporation incurred the following expenses in connection with the development of a new product:Salaries$100,000Utilities18,000Materials25,000Advertising5,000Market survey3,000Depreciation on machine9,000Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over60 months, determine the amount of the deduction for research and experimental expenditures for the current year.
a70. Last year, Green Corporation incurred the following expenditures in the development of a new plant process:Salaries$250,000Materials90,000Utilities20,000Quality control testing costs40,000Management study costs5,000Depreciation of equipment18,000During the current year, benefits from the project began being realized in May. If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.
b71. Ivory, Inc., has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in the current year. Ivory’s domestic production activities deduction is:
c72. In the current year, Amber Corporation has taxable income of $880,000, alternative minimum taxable income of $600,000, and qualified production activities income (QPAI) of $640,000. The total W-2 wages paid to employees engaged in qualified domestic production activities are $116,000. Amber’s DPAD for the current year is:
Chapter 07 - Deductions And Losses: Certain Business Expenses And Lossesa. $54,000.b. $57,600.c. $58,000.d. $79,200.e. None of the above.ANSWER:
a73. Cream, Inc.’s taxable income for the current year before any deduction for an NOL carryforward of $30,000 is $70,000. Cream’s qualified production activities income (QPAI) is $60,000. What is the amount of Cream’s domestic production activities deduction (DPAD) for the current year?
d74. Tonya had the following items for last year:Salary$40,000Short-term capital gain12,000Nonbusiness bad debt(25,000)Long-term capital gain8,000For the current year, Tonya had the following items:Salary$45,000Collection of last year’s bad debt25,000Determine Tonya’s adjusted gross income for the current year.

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