Question

Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started: (Leave no answer blank. Enter zero if applicable.) Expense Date Amount Attorney fees for articles of incorporation February 10 $ 39,000 March 1 – March 30 wages March 30 6,100 March 1 – March 30 rent March 30 2,700 Stock issuance costs April 1 27,000 April 1 – May 30 wages May 30 15,250 b. What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1 (excluding the portion of the expenditures that are amortized over 180 months)? c. What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 (not including the amount determined in part b)? (Round intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)

Answer 1

WN

Startup costs are the cost incurred before the business began.

Startup costs = March 1 - March 30 wages + March 1 - March 30 rent = $6100 +$2700 = $8,800

Organisational expenditures = Attorney fees for articles of incorporation = $39000.

b.Both organisational expenditures as well as startup costs do not exceed $50,000 each. Hence, the corporation can immediately expense Startup costs of $5,000 and organisational expenditures of $5,000 in year 1

c.                                                                  Organisation Expenditure                   Start Up Costs

Total Cost Recognised                                   $39000                                                $8800

Amount immediately expenses                      $5000                                                  $5000

Remaining Cost                                             $34000                                                $3800

Amortization Period                                       180 months                                          180 months

Monthly Amortization                                     $188.89                                               $21.11

Amortization Period in Yr 1

from Apr to Dec                                               9 months                                              9 months

Amount Deductible as amortization

expense                                                       $1700.01    $189.99