Richards Corporation Reports Taxable Income Exceeding $1 Million Per Year

question 27

Multiple Choice

Richards Corporation reports taxable income exceeding $1 million per year.In 2016 it acquired and placed in service $1,600,000 of new equipment.The equipment,its only property addition this year,is five-year property and was shipped directly from the factory.What is the maximum tax deduction it can take this year with respect to this new equipment?

• A)$1,160,000
• B)$800,000
• C)$720,000
• D)$1,050,000

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Definitions:

Post-Closing Trial Balance

A summary of all account balances in a company's general ledger after closing entries are made, serving to verify the equality of debits and credits.

Financial Statements

Documents that provide an overview of a company's financial condition in both short and long term, including the balance sheet, income statement, and cash flow statement.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent ones, thereby preparing the accounts for the next period.

Depreciation Expense

is the charged amount for a particular period for the reduction in value of tangible assets due to usage and passage of time.