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Organizational costs for a corporation

1. Corporate organizational expenses include:
a. Filing fees for registering the corporation.
b. Appraisals
c. Both
d. Neither

2. What is a primary factor for determining when a corporation's business begins?
a. The acquisition of operating assets necessary to conduct business
b. Signing articles of incorporation
c. Both
d. Neither

3. Which of the following is NOT an organizational expense?
a. Legal fees incident to the corporation's formation
b. Expenses of temporary directors
c. Expenses connected with issuing or selling shares of stock
d. Pre-formation accounting services

4. Which statement is NOT true with regard to amortizing organization costs?
a. An election is required for an amortization of organizational cost amounts.
b. Organizational expenses and start-up costs are not the same for tax purposes
c. The amortization period is defined under Section 195
d. Amortization begins the month the corporation has shareholders

5. The amortization amount for organizational costs is reported
a. As part of the depreciation schedule - Form 4562
b. Directly on Page 1 of the Form 1120 as a business expense
c. Can be either
d. None of the above

Solution Preview

1. Appraisals of property or other items that may be transferred to a corporation are not part of organizational costs. Those costs add to the basis of the assets being ...

Solution Summary

The five multi-choice questions discuss various aspects of the accounting treatment for organizational costs for a new business entity. Amortization of organizational costs begins the month in which the corporation is considered to "be in business" is analyzed. The solution consists of a sentence or two in response to each question to explain the correct answer.