Question

Required information

Problem 10-53 (LO 10-2, LO 10-3)

[The following information applies to the questions displayed below.]

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.)

	Date Placed		Original
Asset	in Service		Basis
Machinery	October 25	$	76,000
Computer equipment	February 3		14,500
Used delivery truck*	August 17		27,500
Furniture	April 22		157,500

*The delivery truck is not a luxury automobile.

Problem 10

a. What is the allowable MACRS depreciation on Evergreen’s property in the current year, assuming Evergreen does not elect $179 expense and elects out of bonus depreciation?

b. What is the allowable MACRS depreciation on Evergreen’s property in the current year if Evergreen does not elect out of bonus depreciation?

Answer 1

Part A

MACRS Depreciation

$41767

Asset	Placed in service	Original basis	Rate	Depreciation
Computer equipment (5 year)	February 3	14500	20.00%	2900
Furniture (7 year)	April 22	157500	14.29%	22507
Used delivery truck (5 year)	August 17	27500	20.00%	5500
Machinery (7 year)	October 25	76000	14.29%	10860
Total		275500		$41767

Evergreen cannot make use of the mid-quarter convention because only 27.59% of its tangible personal property was placed in service during the 4^th quarter (76,000/275500). Moreover, the delivery truck is not to be treated as a luxury auto

Part B

MACRS Depreciation

$275500

Asset	Placed in service	Original basis	Rate	Depreciation
Computer equipment (5 year)	February 3	14500	100.00%	14500
Furniture (7 year)	April 22	157500	100.00%	157500
Used delivery truck (5 year)	August 17	27500	100.00%	27500
Machinery (7 year)	October 25	76000	100.00%	76000
Total		275500		$275500