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Multiple Choice Quiz
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1
When a business mistakenly claims too little depreciation for the prior year, the business may elect to increase future depreciation to make up the difference allowable depreciation.
A)True
B)False
2
An asset's capitalized cost basis includes the actual purchase price and all other expenses associated with placing the asset in service.
A)True
B)False
3
Depreciation is currently computed under the Accelerated Cost Recovery System (ACRS).
A)True
B)False
4
If taxpayer places only one asset (machinery) in service during the fourth quarter of the year, the mid-quarter convention must be used.
A)True
B)False
5
The same depreciation convention is used for an asset in the year of acquisition also applies for that asset in the year of disposition.
A)True
B)False
6
When applicable, all taxpayers may use bonus depreciation for qualifying property.
A)True
B)False
7
The convention for tax amortization is always the half-year convention.
A)True
B)False
8
Natural resources may be recovered using the greater of cost or percentage depletion method.
A)True
B)False
9
Which of the following is not depreciated?
A)Machinery
B)Coal deposit
C)Computer
D)Building
10
Which convention is the general rule for intangible property?
A)Full-month.
B)Half-year.
C)Mid-month.
D)Mid-quarter.
11
Dax purchased only one asset during the current year. It placed in service equipment (7-year property) on September 10 with a basis of $40,000. Calculate the maximum depreciation expense (ignoring any §179 or bonus depreciation):
A)$0.
B)$1,428.
C)$5,716.
D)$16,000.
12
Frazier LLC placed in service on June 19, 2013 computer equipment (5-year property) with a basis of $2,050,000. Assume that Frazier has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including section 179 expensing (but ignoring bonus expensing):
A)$292,945.
B)$410,000.
C)$770,000.
D)$810,000.
13
Bonnie purchased a computer (5 year property) for use in her sole proprietorship. The basis of the computer was $3,000. Bonnie used the computer in her business 80 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie's depreciation expense during the first year assuming the sole proprietorship had a loss during the year:
A)$120.
B)$240.
C)$480.
D)$600.
E)None of the above.
14
Griff LLC purchased an office building and land during the current year for $500,000. The purchase price was allocated as follows: $350,000 to the building and $150,000 to the land. The property was placed in service on August 22. Calculate Griff's maximum depreciation:
A)$1,445.
B)$3,371.
C)$3,751.
D)$4,815.
E)None of the above.
15
Assume that Brittany acquires a competitor's assets on March 1st. The purchase price was $250,000. Of the amount, $150,000 is allocated to tangible assets and $100,000 is allocated to goodwill (a §197 intangible asset). What is Brittany's amortization expense for the current year?
A)$0.
B)$5,556.
C)$8,333.
D)$13,889.
16
Dorn purchased the rights to extract turquoise on a tract of land over a five year period. Dorn paid $200,000 for extraction rights. A geologist estimates that Dorn will recover 10,000 pounds of turquoise. During the current year, Dorn extracted 2,500 pounds of turquoise, which it sold for $150,000. What is Dorn's cost depletion expense for the current year?
A)$0.
B)$50,000.
C)$150,000.
D)$200,000.
E)None of the above.





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