Question

Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2018. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2018:

Asset	Cost		Date Placed in Service
Office furniture	$	150,000	02/03/2018
Machinery		1,560,000	07/22/2018
Used delivery truck*		40,000	08/17/2018

*Not considered a luxury automobile.

During 2018, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2019 to increase its production capacity. These are the assets acquired during 2019:

Asset	Cost		Date Placed in Service
Computers & info. system	$	400,000	03/31/2019
Luxury auto†		80,000	05/26/2019
Assembly equipment		1,200,000	08/15/2019
Storage building		700,000	11/13/2019

†Used 100% for business purposes.

Karane generated taxable income in 2019 of $1,732,500 for purposes of computing the §179 expense. (Use MACRS)

c. Compute the maximum 2019 depreciation deductions, including §179 expense, but now assume that Karane would like to take bonus depreciation.

Description	COst	SEC. 179 Expense	Bonus	MACRS Basis	Current Marcs Depreciation	Total Depreciation Deduction
2018
Office furniture
Machinery
Used delivery truck
2019 Assets
Computers
Luxury Auto
Assembly Equipment
Storage Building
Total

Answer 1

SOLUTION:

DEPRECIATION	COST	179 EXPENSE	MACRS BASIS	CURRENT MACR DEPRECIATION	TOTAL DEPRECIATION DEDUCTION
FURNITURE	150000		150000	21435	21435
MACHINERY	1560000	1000000	560000	80024	1080024
USED DELIVERY TRUCK	40000		40000	8000	8000
TOTAL	1750000	1000000	750000	109459	1109459

WORKING NOTES

FOR FURNITURE AND MACHINERY

CURRENT MACRS DEPRECIATION = MACRS BASIS * 14.29% (FROM MACRS BASIS 7 YEARS DEPRECIATION TABLE)

FURNITURE= 150000*14.29% = 21435

MACHNERY= 560000* 14.29%= 80024

FOR USED TRUCK

CURRENT MACRS DEPRECIATION = MACRS BASIS * 20%

(FROM MACRS BASIS 5 YEARS DEPRECIATION TABLE)

USED DELIVERY TRUCK= 40000*20% = 8000

TOTAL DEPRECIATION DEDUCTION= 179 EXPENSE + CURRENT MACRS DEPRECIATION

DESCRIPTION	COST	179 EXPENSE	MACRS BASIS	CURRENT MACRS DEPRECIATON	TOTAL DEPRECIATION DEDUCTION
COMPUTER AND INFO SYSTEM	400000	290000	110000	22000	312000
LUXURY AUTO	80000	10000	70000	-	10000
ASSEMBLY EQUIP	1200000	-	1200000	240000	240000
STORAGE BUILDING	700000	700000	-	-	700000
TOTAL	2380000	1000000	1380000	262000	1262000

WORKING NOTES:

MACRS BASIS= COST - 179 EXPENSE

CURRENT MACRS DEPRECIATION:

CURRENT MACRS DEPRECIATION = MACRS BASIS * 20%

(FROM MACRS BASIS 5 YEARS DEPRECIATION TABLE)

COMPUTER ABD INFO SYSTEM = 110000* 20% = 22000

ASSEMBLY EQUIPMENT= 1200000* 20% = 240000

TOTAL DEPRECIATION DEDUCTION= 179 EXPENSE + CURRENT MACRS DEPRECIATION.

THANKYOU, PLEASAE UPVOTE!!