Fayette Corporation incorporates on January 7, begins business on July 10, and elects to have its

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Fayette Corporation incorporates on January 7, begins business on July 10, and elects to have its initial tax year end on August 31.

Fayette incurs the following expenses between January and August related to its organization during the current year:

 

 

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Requirement

a.
What alternative treatments are available for Fayette's expenditures?
b.
What amount of organizational expenditures can Fayette Corporation deduct on its first tax return for the fiscal year ending

August 31?
c.
What amount of start-up costs can Fayette Corporation deduct on its first tax return?
Requirement a. What alternative treatments are available for Fayette's expenditures?

Select the tax treatment for each expenditure. Begin with the expenditures incurred through June 1. Then, complete the table for the expenditures through July 15.

Date
Expenditure
Amount
 
Treatment
January 30
Travel to investigate potential business site
$4,000
 
 
May 15
Legal expenses to draft corporate charter
2,500
 
 
May 30
Commissions to stockbroker for issuing and selling stock
4,500
 
 
May 30
Temporary directors' fees
1,100
 
 
June 1
Expense of transferring building to Fayette
3,000
 
 
 

June 5
Accounting fees to set up corporate books
5,000
 
 
June 10
Training expenses for employees
6,000
 
 
June 15
Rent expense for June
1,300
 
 
July 15
Rent expense for July
1,300
 
 
 

Fayette Corporation can elect to deduct $
 
of organizational expenditures under
 
and amortize the remainder
over
 
months. Fayette also can elect to deduct $
 
of start-up expenditures under
 
and amortize the
remainder over
 
months. These elections are deemed automatic under temporary Treasury Regulations.
 
 
 
 
 
 
 
 
 
 
 
 
 
Requirement b. What amount of organizational expenditures can Fayette

Corporation deduct on its first tax return for the fiscal year ending August 31?

(Do not round intermediary calculations. Only round the amount you input in the cells to the nearest dollar.)

Organizational expenditures total $
 
, and Fayette can deduct $
 
in the first fiscal year.
Requirement c. What amount of start-up costs can

FayetteFayette

Corporation deduct on its first tax return? (Do not round intermediary calculations. Only round the amount you input in the cells to the nearest dollar.)

Start-up expenditures total $
 
, and Fayette can deduct $
 
in the first fiscal year.
 
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