Question

On September 29, 2018, Susie bought office furniture for $150,000. She also bought business computers for $90,000 on October 1, 2018. On January 10, 2019, Susie placed all of the assets in service. Susie did not elect to expense any of the assets under § 179, did not elect straight-line cost recovery, and did not take additional first-year depreciation (if available). Determine the cost recovery deduction for the business assets for 2018

. a. $39,435.

b. $14,290.

c. $34,296.

d. $30,290.

e. $36,000.

show all work of how solution was achieved

Answer 1

Cost recovery refers to the deduction of a portion of the cost of an asset, used in a business or for the production of income, over its useful life through depreciation, amortization, or depletion.

As susie did non elect to expense any of the assets under § 179 "which allows an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time. The Section 179 deduction can be taken if the piece of equipment is purchased or financed and the full amount of the purchase price is eligible for the deduction," so cost recovery for the business assets puschased during 2018 are:

Furniture : $150,000

Computer: $90,000

Total asset = $150,000 + $90,000 = $240,000

Cost of recovery for the business assets for the year 2019 is $ 240,000.

Note : A company can now expense up to $1,020,000 deduction on new or used equipment with Section 179.