The Cox Accounting Firm Places the Following Property in Service

question 28

Multiple Choice

The Cox Accounting Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}\text { Froperty }&\text { Placed in }\\\underline{\text { Description }}& \underline{\text { Service }} &\underline{\text { MACRS Life }}&\underline{\text { Cost B asis }} \\ \text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 80,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 70,000 \\\text { Fax machine } & \text { Aug 3 } & 5 \text { years } & \$ 100,000 \\\text { Phone system } & \text { Dec 11 } & 5 \text { years } & \$ 50,000\end{array}$
Cox wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Cox will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.Cox elects out of bonus depreciation.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?

• A)$53,000
• B)$136,003
• C)$140,000
• D)$192,575
• E)$300,000

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product’s cost.

Direct Labour

The wages of workers or employees who are directly involved in the production of goods or the delivery of services.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead based on the efficient usage of manufacturing resources.

Direct Material Used

The raw materials that are directly included in the finished product, easily traceable to specific goods or batches of goods.