Question

Allison purchased equipment that cost $100,000 for use in her business. She expects the equipment to be useful for the business for the next 8 years. Which of the following choices correctly describes the tax treatment of the cost of the equipment?a.) The equipment should NOT be deducted until the year Allison sells or disposes of it.b.) The equipment should be capitalized and depreciated according to the tax codec.) The equipment should be deducted in the year it is purchases

Answer 1

Answer:

Option B The equipment should be capitalized and depreciated according to the tax code

Explanation:

The reason is that the tax treatment of the asset is different from the accounting treatment of an asset. The rules of accounting are rarely followed in the tax which results in the permanent and temporary differences.