[Anonymous]

Is the following answer wrong?

Brand New, Inc., was organized and began active business on January 2, 2014. Brand New incurred the following expenses in connection with creating the business:

State incorporation fees $ 2,000

Legal fees for drafting the charter 6,000

Printing costs for stock certificates 1,500

Professional fees for issuance of stock 4,000

Broker’s commission on sale of stock 7,000

Expense for the temporary directors 5,000

---

Total $25,500

What is the amount of organizational expense that Brand New incurred in 2014?

A. $25,500

B. $18,500

C. $13,000

D. $8,000

Answer: C

I calculated the total organizational costs as $13,000. However, the amount that is actually different is different. I thought the first $5,000 was deductible and the amount in excess of that was amortized over 180 months as long as total organizational costs did not exceed the $50K/$55K thresholds. My answer was $5,533.33. Am I missing something?

[jstay]

Yeah your right but the question is asking how much did it incur not how much did it expense/deduct

[Anonymous]

Thanks for the hint @jstay!

[Author]

Replies