Question

In: Accounting

A residence was constructed in 1986 for $72,000 on a lot that cost $14,000. Before the...

A residence was constructed in 1986 for $72,000 on a lot that cost $14,000. Before the property was converted to rental use in the current year, a finished porch costing $8,000 was added and a $3,000 casualty loss was claimed. If the fair market value on the date of conversion to rental use was $84,000 ($74,000 for the house and $10,000 allocated for the land), what is the depreciable basis?

A.$84,000
B.$74,000
C.$72,000
D.$77,000

During the current year, Liquid Corporation, a calendar-year taxpayer, purchased and placed in service the following assets on the following dates:

Machine	$ 6,400	February 1
Truck	20,000	October 15
Computer	8,000	December 1

The three assets are all 5-year property under MACRS. The Sec. 179 and bonus depreciation deductions were not elected. What is Liquid’s depreciation deduction?

A.$1,720
B.$3,440
C.$6,880
D.$3,640

Expert Solution

Ans.a A residence was constructed in 1986 for $72,000 on a lot that cost $14,000. Before the property was converted to rental use in the current year, a finished porch costing $8,000 was added and a $3,000 casualty loss was claimed. If the fair market value on the date of conversion to rental use was $84,000 ($74,000 for the house and $10,000 allocated for the land).

Depreciable Basis= Acquisition cost of an asset + Finishing porch cost - casualty loss

= $72,000 + $8,000 - $3,000

= $77,000.

Hence, $77,000 is a depreciable basis.

Ans.b

Depreciation For Recovery Period

Recovery year	5 year	Depreciation	Book value
1	20%	$6,880	$27,520
2	32%	$11,008	$16,512
3	19.20%	$6,605	$9,907
4	11.52%	$3,963	$5,944
5	11.52%	$3,963	$1981
6	5.76%	$1,981	$0

Asset Cost = Machine + Truck + Computer

=$6,400 + $20,000+ $8,000

=$34,400

MACRS Depreciation for 1 year= Asset Cost x 1/Useful Life

=$34,400*1/5

=$6,880

Hence, The Liquid’s depreciation deduction is $6,880.

ekkarill92 answered 8 months ago

The owner of Lot A constructs a steel building which is mistakenly constructed 20 feet over...

The owner of Lot A constructs a steel building which is mistakenly constructed 20 feet over her lot line into Lot B. The building is bolted to a concrete slab that is also 20 feet over the lot line. If the building sits in its position for 35 years and is used by the owner of Lot A for all 35 years, who owns what and why? Q1: While most contracts can be accomplished orally, to transfer real property, one...

Alpaca Inc. purchased a corner lot in 2010 at a cost of $500,000. The lot was...

Alpaca Inc. purchased a corner lot in 2010 at a cost of $500,000. The lot was recently appraised at $800,000. At the time of the purchase, the company spent $25,000 to grade the lot and has been leasing this place as a parking lot for $10,000 a year. The renewal for the lease contract was not expected to expire until 2030. The company now wants to build a new retail store on the site. The building cost is estimated at...

Carol sold her personal residence to Mike for $300,000. Before the sale, Carol paid the real...

Carol sold her personal residence to Mike for $300,000. Before the sale, Carol paid the real estate taxes of $8,000 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $5,000 to Carol and $3,000 to Mike. a. What is Mike’s basis in the residence? b. What is Carol’s amount realized from the sale of the residence? c. What amount of real estate taxes can Mike deduct? d. What amount of real estate taxes can Carol...

In a Toothpaste manufacturing environment, there are a lot of processes involved before getting the final...

In a Toothpaste manufacturing environment, there are a lot of processes involved before getting the final product. It starts with the dumping of bulk raw material like calcium carbonate, silica etc. to the Mixer. In the Mixer, all the other ingredients like Glycerin, Water, Gums, Flavor etc. get added to produce the final cream. The cream is then transferred to bulk storage tanks where is it stored and buffered. The cream then flows to packing lines for tubing and finally...

A company is considering the purchase of a new machine. The machine will cost $14,000, will...

A company is considering the purchase of a new machine. The machine will cost $14,000, will result in an annual savings of $1750 with a salvage value of $500 at the end of 12 years. For a MARR of 7%, what is the benefit to cost ratio? Question options: 0.63 8.25 1.36 1.01

A lot of thought goes into the grant application process before the actual decision is made...

A lot of thought goes into the grant application process before the actual decision is made to pursue the submission of a grant. In this assignment, you will demonstrate your approach to the grant application process. Consider the approach you will utilize and address the following: Describe how you will define your chosen public health issue and how you think you will prepare for the grant application process. Your paper should include the following sections: Introduction: Define your chosen public...

Transaction 5 Sales were $72,000. Cost of merchandise sold was 75% of sales. 40% of sales...

Transaction 5 Sales were $72,000. Cost of merchandise sold was 75% of sales. 40% of sales were for cash. [Note: Record the complete entry for the sales first and the complete entry for the expenses second] Account: Dollar amount: Account: Dollar amount: Account: Dollar amount: Account: Dollar amount: Account: Dollar amount: Account: Dollar amount:

Some businesses need a lot of fixed cost, but the variable cost required will be very...

Some businesses need a lot of fixed cost, but the variable cost required will be very small. On the other hand, some other businesses need only small fixed cost, but have high variable cost. In which situation there is a higher chance of perfect competition? Why?

What is a component of transportation cost? A. Handling cost. B. Lot quality cost. C. Insurance...

What is a component of transportation cost? A. Handling cost. B. Lot quality cost. C. Insurance cost. D. Production cost.

4. A new machine will cost $17,000 and will have a resale value of $14,000 after...

4. A new machine will cost $17,000 and will have a resale value of $14,000 after five years. Special tooling will cost $5,000. The tooling will have a resale value of $2,500 after five years. Maintenance will be $2,000 per year. The effect annual interest rate is 6%. The average annual cost of ownership during the next five years will be most nearly. (A) $2,000 (B) $2,300 (C) $4,300 (D) $5,500 5. An old covered wooden bridge can be strengthened...