Question

At the beginning of the year, Miranda began a calendar-year business and placed in service the following assets during the year:

	Date	Cost
Asset	Placed in Service	Basis
Computers	1/30	$	50,500
Office desks	2/15	$	54,500
Machinery	7/25	$	97,500
Office building	8/13	$	430,000

Assuming Miranda elects out of bonus depreciation and does not elect §179 expensing , answer the following questions: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

b. What is Miranda’s year 2 cost recovery for each asset?

Answer 1

Based on the information available, we can calculate the year 2 cost recovery as follows:-

Asset	Original cost	Date placed in service	MACRS Asset Life(yrs)	MACRS Depreciation rate	MACRS cost recovery
Computers	50,500	01/30	5	32.00%	16,160
Office Desks	54,500	02/15	7	24.49%	13,347
Machinery	97,500	07/25	7	24.49%	23,878
Office building	430,000	08/13	39	2.564%	11,025
				MACRS Cost Recovery	64,410

We will use the Half year convention table for calculating the cost recovery on the assets placed in service(except office building which is depreciated under the mid month convention) as the company has not placed more than 40% of service during the year. Please let me know if you have any questions via comments