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1 | |
Largo Corporation purchases a business asset for $30,000. Largo is allowed to deduct
the cost of the asset over 5 years on the following declining scale:
| Year | Allowance | | 1 | $15,000 | | 2 | $10,000 | | 3 | $2,500 | | 4 | $1,750 | | 5 | $750 |
If the Largo Corporation has a marginal tax rate of 30 percent and it
uses a 10 percent discount rate for NPV, the after tax cost of the asset is? |
| | A) | $20,000 |
| | B) | $21,605.32 |
| | C) | $26,105.32 |
| | D) | $22,014.09 |
| | E) | Some other answer. |
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2 | |
The Unicap rules |
| | A) | Determine he maximum amount of expenses that can be capitalized during one year. |
| | B) | Require that firms capitalize only direct costs of manufacturing, purchasing, or storing inventory. |
| | C) | enerally speaking require that firms capitalize direct and indirect costs that are associated with manufacture and resale of inventory. |
| | D) | Specifically exclude items like officer compensation, pension, retirement and other employee benefits from being capitalized in the cost of inventory. |
| | E) | Were developed because taxpayers would prefer to deduct expenditures as product costs rather than period costs. |
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3 | |
Which of the following would be good examples of businesses that might use the specific identification method to value ending inventory. |
| | A) | A retail store. |
| | B) | Antique Dealer. |
| | C) | A soft drink manufacturer. |
| | D) | Kleenex manufacturer. |
| | E) | one of these examples would likely use the specific identification method for valuing ending inventory. |
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4 | |
Which of the following would not be considered a wasting asset. |
| | A) | An airport runway. |
| | B) | A landfill site. |
| | C) | A parking lot surface. |
| | D) | A painting by De Vinci |
| | E) | All are considered wasting assets. |
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5 | |
The MACRS recovery period for cars, trucks, and other vehicles is? |
| | A) | 3 yr. |
| | B) | 5 yr. |
| | C) | 10 yr. |
| | D) | 15 yr. |
| | E) | 20 yr. |
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6 | |
When considering the MACRS table for tangible personalty property, you should notice that although the recovery period is listed at the top of each column the actual recovery period is longer. Why does this difference exist? |
| | A) | An error in the original creation of the table that hasn't been corrected yet. |
| | B) | The table is based on the mid-quarter convention which limits recovery in the first period. |
| | C) | The table is based on 200 percent declining balance which accounts for the extra period of recovery. |
| | D) | The table is based on the half-year convention which limits recovery in the first period to a half year. |
| | E) | The table is based on 150 percent declining balance which accounts for the extra period of recovery. |
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7 | |
The cost recovery tables for realty are based on which of the following conventions? |
| | A) | mid-month |
| | B) | half-year |
| | C) | mid-week |
| | D) | mid-quarter |
| | E) | the tables have no inherit convention built-in. |
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8 | |
Jipco Corporation purchased 5 year business personalty property 2 years ago for $25000 and sold the property at the end of the current year (Year 2). Using the MACRS table and assuming that Jipco received a full years depreciation in the current year, determine the basis Jipco has in the asset? |
| | A) | $5,555. |
| | B) | $12,000. |
| | C) | $13,000. |
| | D) | $3,000. |
| | E) | $10,000. |
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9 | |
When firms elect to expense additional amounts of the cost of tangible personalty property in the first year of operation, they are not required to adjust the basis of the asset for cost recovery under MACRS? |
| | A) | True |
| | B) | False |
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10 | |
Amortization is a method of cost recovery that applies generally to: |
| | A) | All asset types and is an election that taxpayers make. |
| | B) | tangible assets. |
| | C) | intangible assets. |
| | D) | Realty assets. |
| | E) | angible and Intangible assets. |
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2002 McGraw-Hill Higher Education