Final answer:
Raleigh Corporation can take a deduction of $56,666.70 for the current year, based on the $340,000 expenditure deferral and amortization over 60 months and realizing benefits starting in March.
Step-by-step explanation:
The question concerns the calculation of a tax deduction for the Raleigh Corporation related to the amortization of capital expenditures. The tax deduction will be based on the costs of developing a new plant process that began to yield benefits during the current year.
The total expenditures are:
- Salaries: $200,000
- Materials: $80,000
- Utilities: $10,000
- Quality control testing costs: $30,000
- Management study costs: $5,000
- Depreciation of equipment: $15,000
The sum of these expenditures is $340,000.
Assuming a 60-month deferral and amortization period, the yearly deduction is calculated by dividing the total expenditures by 60 months:
Yearly Deduction = Total Expenditures / 60 months
Yearly Deduction = $340,000 / 60 months
Yearly Deduction = $5,666.67 per month
Since benefits began to be realized in March of the current year, Raleigh Corporation can only claim the deduction for the months of March through December. This amounts to 10 months of deductions in the current year.
Current Year Deduction = Monthly Deduction x Number of months
Current Year Deduction = $5,666.67 x 10 months
Current Year Deduction = $56,666.70