Nicole organized a new corporation. The corporation began business on April 1 of

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:

What is the total amount of the start-up costs and organizational expenditures for Nicole's corporation?

      
  

What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1?

      
  

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 it immediately expensed)? (Round intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)

      
     

What would be the allowable organizational expenditures, including immediate expensing and amortization, if Nicole started a sole proprietorship instead?(Leave no answer blank. Enter zero if applicable.)

     

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:

Explanation / Answer

1. Startup costs are the cost incurred before the business began.

Startup costs = March 1 - March 30 wages + March 1 - March 30 rent = $6,550 +$2,850 = $9,400

Organisational expenditures = Attorney fees for articles of incorporation = $40,500

2. 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

3.

Amortization period in Year 1

(April to December)

d. Organizational expenditure is allowed only for Corporations and partnerships but not for sole proprietorship. Sole Proprietoship shall treat both orgainisational expenditure and startup costs as Startup costs. $5,000 shall be immediately expensed in year 1 and remaining costs shall be amortized oevr the period of 180 months.

Organisation expenditure Startup costs Total costs recognised $40,500 $9,400 Amount immediately expensed $5,000 $5,000 Remaining costs $35,500 $4,400 Amortization period 180 months 180 months Monthly amortization $197.22 $24.44

Amortization period in Year 1

(April to December)

9 months 9 months Amount deductible as amortization expense $1774.98 $219.96

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