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    Depreciation Deductions: Gross Profit Under Percentage

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    In 2007, Tiger Corporation, a calendar-year taxpayer, purchases and places into service machinery with a 7-year life that cost $268,000. The mid-quarter convention does not apply. Tiger elects to depreciate the maximum under Sec. 179. Tiger's taxable income for the year before the Sec. 179 deduction is $150,000. What is Tiger's total depreciation deductions related to this property?

    a. $38,297
    b. $112,000
    c. $134,292
    d. $150,297

    18. This year, a contractor agrees to build a building for $2,500,000 by the end of next year. The builder's cost is estimated to be $1,800,000. The actual costs this year are $900,000 and next year's actual costs are $1,300,000. Under the percentage of completion method this year's gross profit is:

    a. $0.
    b. $300,000.
    c. $350,000.
    d. $700,000.

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    Solution Preview

    Question 17: ANSWER b. $112,000
    Taxable income after MACRS ...

    Solution Summary

    The solution examines depreciation deductions. The gross profit under percentage is determined for Tiger Corporation.