Essay

On January 1, 2013, Roxburgia Company places a commercial storage building in service. The costs allocated to construction of the building total $300,000 and land is accounted for separately. Which of the following is a true statement with respect to the depreciation of the building?

A) Since the building was placed in service on the first day of the year, the depreciation expense for each year the building is used, except for the year of disposition, will be the same amount.

B) The depreciation expense for Year 2 would be the same regardless of whether the building is placed in service on January 1, 2013 or February 1, 2013.

C) The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated.

D) All of the above.

E) Since the land is accounted for separately, the amount of depreciation expense for the building cannot be determined from the information given.

11.

Becky is a cash basis taxpayer with the following transactions during her calendar tax year:

Cash basis revenue

$54,000

Cash basis expenses, except rent

$25,000

Rent expense (paid on December 1) for use of a building for 18 months

$36,000

What is the amount of Becky's taxable income from her business for this tax year?

A) $23,000

B) $17,000

C) None of the above

D) $27,000

E) $25,000

12.

"Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.

A) True

B) False

13.

Depreciation on property in the five-year MACRS class is claimed over a period of six tax years due to the half-year convention.

A) True

B) False

14.

Mark the correct answer. In cash basis accounting, for tax purposes:

A) Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred.

B) Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or...