Question

Problem 10-54 (LO 10-2, LO 10-3)

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, Table 2, and Table 5.)

	Date Placed		Original
Asset	in Service		Basis
Machinery	October 25	$	110,000
Computer equipment	February 3	$	50,000
Used delivery truck*	March 17	$	63,000
Furniture	April 22	$	190,000
Total		$	413,000

*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 $700,000.

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.)

Answer 1

The MACRS Depreciation can be calculated as follows :-

Asset	Data placed in service	Quarter placed in service	Original Basis	Life in Years	Depreciation %	Depreciation Amount
Machinery	October 25	4th	1,10,000	7	14.29%	15,719
Computer Equipment	February 3	1st	50,000	5	20.00%	10,000
Used delivery truck	March 17	1st	63,000	5	20.00%	12,600
Furniture	April 22	2nd	1,90,000	7	14.29%	27,151
New Flooring	May 12	2nd	7,00,000	39	1.61%	11,235
			Total Depreciation			76,705

Since the assets placed in service during the last quarter of the year is not greater than the 40% of assets placed in service during the year, we use the Half Year convention method for calculating the depreciation expenses.