Question

Convers Corporation (calendar-year-end) acquired the following assets during the current tax year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1, Table2,and Table 5.)

	Date Placed		Original
Asset	in Service		Basis
Machinery	25-Oct	$	100,000
Computer equipment	03-Feb	$	40,000
Used delivery truck*	17-Mar	$	53,000
Furniture	22-Apr	$	180,000
Total		$	373,000

*The delivery truck is not a luxury automobile.

In addition to these assets, Convers installed new flooring (qualified improvement property) to its office building on May 12 at a cost of $600,000.

Problem 10-54 Part a

a. What is the allowable MACRS depreciation on Convers’s property in the current year assuming Convers does not elect §179 expense and elects out of bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)

b. What is the allowable MACRS depreciation on Convers's property in the current year assuming Convers does not elect out of bonus depreciation (but does not take §179 expense)

Answer 1

Answer:-

1.) Current Year Depreciation when elects out Bonus Depreciation:-

A.) Total Cost of Machinery = $100,000

Less: Bonus Depreciation (50% x 100,000)    50,000

Depreciable Basis $ 50,000

Standard Depreciation (5% x $ 50,000) ( $ 2500) (Fourth Qtr.)

Machinery value after depreciation = $ 47,500

B.) Total Cost of Computer Equipment = $40000

Less: Bonus Depreciation (50% x 40,000)    20,000

Depreciable Basis $ 20,000

Standard Depreciation (35% x $ 20,000) ( $ 7000)( First Qtr.)

Computer value after depreciation = $ 13,000   

C.) Total Cost of Truck = $53000

Less: Bonus Depreciation (50% x 53,000)    26500

Depreciable Basis $ 26500

Standard Depreciation (35% x $ 26500) ( $ 9275) ( First Qtr)

Computer value after depreciation = $ 17225   

D.) Total Cost of Furniture = $ 180000

Less: Bonus Depreciation (50% x 180,000)    90000

Depreciable Basis $ 90000

Standard Depreciation (20% x $ 90000) ( $ 18000) ( Half Year)

Computer value after depreciation = $ 72,000   

E.) Total Cost of Office Building = $ 600000

Less: Bonus Depreciation (50% x 600,000)    300000

Depreciable Basis $ 300000

Standard Depreciation (20% x $ 300000) ( $ 60000) ( Half Year)

Computer value after depreciation = $ 240,000   

2.) Current Year Depreciation when not elects Bonus Depreciation:-

A.) Total Cost of Machinery = $100,000

Standard Depreciation (5% x $ 100,000) ( $ 5000) (Fourth Qtr.)

Machinery value after depreciation = $ 95,000   

B.) Total Cost of Computer Equipment = $40000

Standard Depreciation (35% x $ 40,000) ( $ 14000)( First Qtr.)

Computer value after depreciation = $ 26,000   

C.) Total Cost of Truck = $53000

  Standard Depreciation (35% x $ 53000) ( $ 18550) ( First Qtr)

Computer value after depreciation = $ 34450   

D.) Total Cost of Furniture = $ 180000

Standard Depreciation (20% x $ 180000) ( $ 36000) ( Half Year)

Computer value after depreciation = $ 144,000   

E.) Total Cost of Office Building = $ 600000

Standard Depreciation (20% x $ 600000) ( $ 120000) ( Half Year)

Computer value after depreciation = $ 480,000