Question

While completing undergraduate school work in information systems, Dallin Bourne and Michael Banks decided to start a business called eSys Answers which was a technology support company. During year 1, they bought the following assets and incurred the following fees at start-up:

Year 1 Assets	Purchase Date	Basis
Computers (5-year)	October 30, Y1	$	15,000
Office equipment (7-year)	October 30, Y1		10,000
Furniture (7-year)	October 30, Y1		3,000
Start-up costs	October 30, Y1		17,000

In April of year 2, they decided to purchase a customer list from a company started by fellow information systems students preparing to graduate who provided virtually the same services. The customer list cost $10,000 and the sale was completed on April 30th. During their summer break, Dallin and Michael passed on internship opportunities in an attempt to really grow their business into something they could do full time after graduation. In the summer, they purchased a small van (for transportation, not considered a luxury auto) and a pinball machine (to help attract new employees). They bought the van on June 15, Y2, for $15,000 and spent $3,000 getting it ready to put into service. The pinball machine cost $4,000 and was placed in service on July 1, Y2.

Year 2 Assets	Purchase Date	Basis
Van	June 15, Y2	$	18,000
Pinball machine (7-year)	July 1, Y2		4,000
Customer list	April 30, Y2		10,000

Assume that eSys Answers does not claim any §179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

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Item 2 Part 2 of 2 1.5 points

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[The following information applies to the questions displayed below.]

While completing undergraduate school work in information systems, Dallin Bourne and Michael Banks decided to start a business called eSys Answers which was a technology support company. During year 1, they bought the following assets and incurred the following fees at start-up:

Year 1 Assets	Purchase Date	Basis
Computers (5-year)	October 30, Y1	$	15,000
Office equipment (7-year)	October 30, Y1		10,000
Furniture (7-year)	October 30, Y1		3,000
Start-up costs	October 30, Y1		17,000

In April of year 2, they decided to purchase a customer list from a company started by fellow information systems students preparing to graduate who provided virtually the same services. The customer list cost $10,000 and the sale was completed on April 30th. During their summer break, Dallin and Michael passed on internship opportunities in an attempt to really grow their business into something they could do full time after graduation. In the summer, they purchased a small van (for transportation, not considered a luxury auto) and a pinball machine (to help attract new employees). They bought the van on June 15, Y2, for $15,000 and spent $3,000 getting it ready to put into service. The pinball machine cost $4,000 and was placed in service on July 1, Y2.

Year 2 Assets	Purchase Date	Basis
Van	June 15, Y2	$	18,000
Pinball machine (7-year)	July 1, Y2		4,000
Customer list	April 30, Y2		10,000

Assume that eSys Answers does not claim any §179 expense or bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations)

b. Complete eSys Answers's Form 4562 for Y1.

(Input all values as positive numbers. Use 2018 tax rules regardless of year on tax form.)

Answer 1

Answer:-

1 Yl Cost recoverv 2 Asset 3 Computer equipment 4 office equipment 5 Furniture 6 Start-up costs 7 Start-up immediate expense 8 Total Cost reco remaining basis Quarter Rate 15000 4th 10000 4th 3000 4th Depreciation expense 750 357 107 200 5000 6414 original basis lExpense 15000 10000 3000 17000 0.05 0.0357 0.0357 12000 N/A Working b 5000 expense 10 Start-up Costs Y1 11 Depreciation 12 1) Maximum immediate expense 13 2) Total start-up costs 14 3) Phase-out thresold 15 4) immediate expense phase-out 16 5) Allowable immediate expense 17 6) remaining start-up costs 187) Recovery period in months 199) Isys' business months during year 1 Amount (S) Explanation 5000 section 195 17000 Given in probem 50000 section 195 0 (2-3) 5000 (1-4) 12000|(2-5) 66.67 (6/7) ctober through decembe Year 1 staight-line amortization for start-up 200 (8*9 20 costs

22 Y2 Cost Recove 23 Asset 24 Computer equipment 25 office equipment 26 Furniture 27 Start-up costs 28 Delivery van 29 Pinball machine 30 Customer List 31 Total cost Recovery expense 32 33 De 34 1) Customer list (section 197 intangible) 35 2) recovery period in months 36 3) Month y straight-line amortization 37 4) April through December 38 Year1 straight-line amortization for custom 39 original basis Expense 15000 10000 3000 17000 18000 4000 1000 remaining basis uarter Rate 150004th 10000 4th 3000 4th Depreciation expense 5700 2755 875 800 3600 572 500 14754 0.38 0.2755 27.55 12000 N/A 66.6712 0.2 0.1429 N/AWorking b 5000 HY HY Amount ($) Explanation ation 10000 Given in problem 180 Section 197 55.56 1/2) 500 (3*4)

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