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In: Accounting

Tan Company acquires a new machine (10-year property) on January 15, 2020, at a cost of...

Tan Company acquires a new machine (10-year property) on January 15, 2020, at a cost of $200,000. Tan also acquires another new machine (7-year property) on November 5, 2020, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2020.

a.$102,000

b.$24,000

c.$25,716

d.$132,858

Barry purchased a used business asset (seven-year property) on September 30, 2020, at a cost of $200,000. This is the only asset he purchased during the year. Barry did not elect to expense any of the asset under § 179, did not claim additional first-year depreciation, and did not elect straight-line cost recovery. Barry sold the asset on July 17, 2021. Determine the cost recovery deduction for 2021.

a.$19,133

b.$34,438

c.$55,100

d.$24,490

White Company acquires a new machine (seven-year property) on January 10, 2020, at a cost of $620,000. White makes the election to expense the maximum amount under § 179, and wants to take any additional first-year depreciation allowed. No election is made to use the straight-line method. Determine the total deductions in calculating taxable income related to the machine for 2020, assuming that White reports taxable income of $800,000.

a.$568,574

b.$88,598

c.$620,000

d.$301,159

Solutions

Expert Solution

1)

Answer - $25,716

The total cost recovery is computed as follows.

10-year property
MACRS cost recovery ($200,000 × .10) $20,000
7-year property
MACRS cost recovery ($40,000 × .1429) 5,716
Total cost recovery $25,716

2)

Answer - $24,490

Depreciation percentage in 2021(year of sale) = 24.49%*50% = 12.245%
Cost recovery deduction for 2021 = 200000*12.245%= $24490
Option D is correct

3)

Answer -

Under Section 179, full deduction is claimed which is of $1,000,000 Now, the cost of machine is $6,20,000

So, the total deductions is $6,20,000 (fully deductible).

White company.

Cost of Machine    : $6,20,000.00

Section 179 deduction   :   $6,20,000.00

Bonus Depreciation deduction : $ 00.00  

(100% in 2020)

Normal 1st year Depreciation : $ 00.00

Total First Year Depreciation $6,20,000.00

If u r satisfied plz give a like

In case of any doubts plz let me know tanq

ekkarill92 answered 1 year ago
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