Everest Corp

question 1882

Essay

Everest Corp. acquires a machine (seven- year property) on January 10, 2018 at a cost of $2,512,000. Everest make the election to expense the maximum amount under Sec. 179, and bonus depreciation is not claimed.
a. Assume that the taxable income from trade or business is $1,500,000.
(1) What is the amount of the Sec. 179 expensing deduction for the current year?
(2) What is the amount of the Sec. 179 carryover to the next tax year?
(3) What is the amount of depreciation allowed?
b. Assume instead that the taxable income from trade or business is $800,000.
(1) What is the amount of the Sec. 179 expensing deduction for the current year?
(2) What is the amount of the Sec. 179 carryover to the next tax year?
(3) What is the amount of depreciation allowed this year?

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Definitions:

Bad Debts

Amounts owed to a company that are not expected to be collected, often recognized as an expense on the income statement.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred.

Allowance Method

An accounting technique used to estimate and prepare for the amount of accounts receivable that may not be collected.

Contra Asset Account

An account on a company's balance sheet that reduces the value of a related account, used to account for items like depreciation, amortization, and allowances for doubtful accounts.