Question

axpayer. 17. Blue Corporation incurred the following expenses in connection with the development of a new product: Salaries $100,000 Utilities 18,000 Materials 25,000 Advertising 5,000 Market survey 3,000 Depreciation on machine 9,000 Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year. a. $0 b. $118,000 c. $143,000 d. $152,000 18. Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in January of the following year. No assets were purchased in the following year. Grape's cost recovery would begin: a. In the current year using a mid-quarter convention. b. In the current year using a half-year convention. c. In the following year using a mid-quarter convention. d. In the following year using a half-year convention.

Answer 1

17. The qualified research and experimental expenditures are salaries ($100.000) Utilities, ($18,000), materials ($25,000) and depreciation ($9,000) So, total amount = $152,000 If amortized over 60 months, each month would be $152,000/60 = $2,533 However, since sales start next period, amortization would also start in next period and amortization in current period = 0 Hence, option a that is O is correct option. 18. Cost recovery would begin in the following year using a half-year convention. Hence option d. In the following year using a half-year convention. Is correct