Question
In: Accounting
Nicki Corporation (a calendar year corporation) purchased a new machine (7 year property) in July 2015...
Nicki Corporation (a calendar year corporation) purchased a new machine (7 year property) in July 2015 for $20,000. Nicko did not elect section 179 for this asset but did claim 50% bonus depreciation. In November 2018, Nicko sells the machine. What is the machines adjusted basis at the date of sale?
Solutions
Expert Solution
| Yearly rate of depreciation = 100%/7 years = 14.28% | |
| Monthly rate of depreciation = 100%/(7 years x 12 months) = 1.19% | |
| Calculation of machine adjusted basis at the date of sale | |
| Particular | Amount($) |
| Machine value (A) | 20,000 |
| Less: Depreciation | |
| Bonus Depreciation @ 50% of 20,000 | 10,000 |
| Normal Depreciation: | |
| for 2015 for 6 months @ 1.19% per month on 10,000 | 714 |
| For 2016 for 1 full year @ 1.19% pm or 14.28% /year | 1428 |
| For 2017 for 1 full year @ 1.19% pm or 14.28% /year | 1428 |
| For 2018 for 10 month @ 1.19% per month | 1190 |
| Total Depreciation (B) | 14,760 |
| Adjusted basis of the machine at the date of sale (A-B) | 5,240 |
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