In 2012, Sean Incurs $90,000 of Mining Exploration Expenditures, and Deducts

question 6

Multiple Choice

In 2012, Sean incurs $90,000 of mining exploration expenditures, and deducts the entire amount for regular income tax purposes.Which of the following statements is correct?

• A)For AMT purposes, Sean will have a positive adjustment of $81,000 in 2012.
• B)Sean will have a negative AMT adjustment of $9,000 in 2017.
• C)Over a 10-year period, positive and negative adjustments will net to zero.
• D)Only a.and c.are correct.
• E)a., b., and c.are correct.

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Definitions:

Variable Cost

A cost that changes in proportion to the level of activity or volume of goods produced.

Fixed Cost

Expenses that do not change with the level of production or sales activities within a certain range, such as rent or salaries.

High-Low Method

A method applied in managerial accounting that calculates fixed and variable expenses by assessing the maximum and minimum activity levels.

Least-Squares Regression

A statistical method used to determine and approximate the relationship between variables, minimizing the squared differences between observed and predicted values.