Nicole organized a new corporation. The corporation began business on April 1 of
ID: 2339100 • Letter: N
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.)
Explanation / Answer
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
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