EXHIBIT 10-10

! Required information Comprehensive Problem 10-76 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5) (Static) [The following information applies to the questions displayed below.) Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020: Asset Cost Office furniture $ 150,000 Machinery 1,560,000 Used delivery truck* 40,000 *Not considered a luxury automobile. Date Placed in Service 02/03/2020 07/22/2020 08/17/2020 During 2020, Karane was very successful and had no $179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021: Asset Computers and information system Luxury autot Assembly equipment Storage building Cost $ 400,000 80,000 1,200,000 700,000 Date Placed in Service 03/31/2021 05/26/2021 08/15/2021 11/13/2021 tUsed 100% for business purposes. Karane generated taxable income in 2021 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.) Required: d. Now assume that during 2021, Karane decides to buy a competitor's assets for a purchase price of $1,350,000. Compute the maximum 2021 cost recovery, including $179 expense and bonus depreciation. Karane purchased the following assets for the lump- sum purchase price: (Round your final answers to the nearest whole dollar amount.) Asset Inventory Office furniture Machinery Patent Goodwill Building Land Cost $ 220,000 230,000 250,000 198,000 2,000 430,000 20,000 Date Placed in Service 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 Assume that Karane takes the maximum section 179 expense for the Assembly Equipment. X Answer is complete but not entirely correct. Description Cost Section 179 Expense Bonus MACRS Basis Current MACRS Depreciation Current Amortization Total Cost Recovery Deduction 2020 Assets $ $ 0 $ 0$ $ 36,735 0 $ 36,735 Office Furniture Machinery Used Delivery Truck 150,000 1,560,000 40,000 0 0 150,000 520,000 40,000 0 0 0 0 0 12,800 0 12,800 2021 Assets 0 0 0 400,000 8,000 0 72,000 0 X 1,050,000 400,000 8,000 1,050,000 2,247 0 x 0 0 Computers and Information System Luxury Auto Assembly Equipment Storage Building Inventory Office Furniture Machinery 0 400,000 80,000 1,200,000 700,000 220,000 230,000 250,000 0 0 700,000 2,247 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 x 0 0 0 0 Patent 198,000 0 0 0 0 0 x 0 Goodwill 0 0 0 0 0 X 0 Oo oo Building 0 0 0 0 X 0 2,000 430,000 20,000 $ 5,480,000 Oo Land 0 0 0 0 Totals $ 1,050,000 $ 408,000 $ 1,482,000 $ 51,782 $ 0 $ 1,509,782 EXHIBIT 10-10 Automobile Depreciation Limits Recovery Year 1 Year Placed in Service 2020 2019 10,100** 10,100** 16,100 16,100 9,700 9,700 5,760 5,760 2021* 10,100** 16,100 9,700 5,760 2 3 4 and after 2018 10,000** 16,000 9,600 5,760 *As of press date, the IRS had not released the 2021 limitations for automobiles, so throughout the chapter we use the same limitations as in 2020 for 2021. **$8,000 additional depreciation is allowed when bonus depreciation is claimed ($168(k)(2)(F)]. ! Required information Comprehensive Problem 10-76 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5) (Static) [The following information applies to the questions displayed below.) Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020: Asset Cost Office furniture $ 150,000 Machinery 1,560,000 Used delivery truck* 40,000 *Not considered a luxury automobile. Date Placed in Service 02/03/2020 07/22/2020 08/17/2020 During 2020, Karane was very successful and had no $179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021: Asset Computers and information system Luxury autot Assembly equipment Storage building Cost $ 400,000 80,000 1,200,000 700,000 Date Placed in Service 03/31/2021 05/26/2021 08/15/2021 11/13/2021 tUsed 100% for business purposes. Karane generated taxable income in 2021 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.) Required: d. Now assume that during 2021, Karane decides to buy a competitor's assets for a purchase price of $1,350,000. Compute the maximum 2021 cost recovery, including $179 expense and bonus depreciation. Karane purchased the following assets for the lump- sum purchase price: (Round your final answers to the nearest whole dollar amount.) Asset Inventory Office furniture Machinery Patent Goodwill Building Land Cost $ 220,000 230,000 250,000 198,000 2,000 430,000 20,000 Date Placed in Service 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 09/15/2021 Assume that Karane takes the maximum section 179 expense for the Assembly Equipment. X Answer is complete but not entirely correct. Description Cost Section 179 Expense Bonus MACRS Basis Current MACRS Depreciation Current Amortization Total Cost Recovery Deduction 2020 Assets $ $ 0 $ 0$ $ 36,735 0 $ 36,735 Office Furniture Machinery Used Delivery Truck 150,000 1,560,000 40,000 0 0 150,000 520,000 40,000 0 0 0 0 0 12,800 0 12,800 2021 Assets 0 0 0 400,000 8,000 0 72,000 0 X 1,050,000 400,000 8,000 1,050,000 2,247 0 x 0 0 Computers and Information System Luxury Auto Assembly Equipment Storage Building Inventory Office Furniture Machinery 0 400,000 80,000 1,200,000 700,000 220,000 230,000 250,000 0 0 700,000 2,247 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 x 0 0 0 0 Patent 198,000 0 0 0 0 0 x 0 Goodwill 0 0 0 0 0 X 0 Oo oo Building 0 0 0 0 X 0 2,000 430,000 20,000 $ 5,480,000 Oo Land 0 0 0 0 Totals $ 1,050,000 $ 408,000 $ 1,482,000 $ 51,782 $ 0 $ 1,509,782 EXHIBIT 10-10 Automobile Depreciation Limits Recovery Year 1 Year Placed in Service 2020 2019 10,100** 10,100** 16,100 16,100 9,700 9,700 5,760 5,760 2021* 10,100** 16,100 9,700 5,760 2 3 4 and after 2018 10,000** 16,000 9,600 5,760 *As of press date, the IRS had not released the 2021 limitations for automobiles, so throughout the chapter we use the same limitations as in 2020 for 2021. **$8,000 additional depreciation is allowed when bonus depreciation is claimed ($168(k)(2)(F)]