Everest Corp

question 98

Essay

Everest Corp.acquires a machine (seven-year property)on January 10,2017 at a cost of $2,042,000.Everest makes the election to expense the maximum amount under Sec.179.The property is not eligible for bonus depreciation.
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 $400,000.
(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?

---

Definitions:

Proportionately Adjusted Retained Earnings

Retained earnings adjusted in proportion to ownership interest in a company or investment.

Equity Method

A method of accounting for investments reflecting the investor's share of the earnings or losses of the investee in the investor's financial statements.

Contractual Agreement

A legally binding agreement between two or more parties that outlines the terms and conditions of an arrangement.

Financial Statements

Reports that summarize the financial performance and financial position of a company, including the balance sheet, income statement, and cash flow statement.