Powell Inc

question 98

Multiple Choice

Powell Inc.was incorporated and began operations on October 1 and adopted a calendar year for tax purposes.Powell paid $4,200 to the attorney who handled the corporate formation.Which of the following statements is true?

• A)If Powell capitalized the $4,200 payment for financial statement purposes,it must also capitalize it for tax purposes.
• B)Powell can deduct the $4,200 payment on its first tax return.
• C)For tax purposes,Powell must capitalize the $4,200 organizational cost and amortize it over 15 years.
• D)None of the above is true.

---

Definitions:

Labor Rate Variance

The difference between the actual labor costs incurred and the expected or standard labor costs for the production volume achieved.

Direct Labor

Labor costs directly associated with the production of goods or services, involving work that can be directly traced back to specific products.

Direct Materials Price Variance

A measurement of the difference between the actual cost of direct materials and the standard cost expected to be paid, expressed in monetary terms.

Direct Materials Quantity Variance

A measure of the difference between the actual quantity of materials used in production and the standard amount expected, valued at the standard cost.