Question

Passenger Automobile purchased on 05/18, used for business 90% of the time. The cost was $55,600 and basis for depreciation is $50,040. The recovery period is 5 years with 200 DBHY used as method/convention. there is no 179 cost. What is the depreciation deduction?

Answer 1

200 DBHY means Double Declining Method.

As the value of the automobile is $55,600 but 90% used for business so

($55,600*90%)=$50,040 is use for business. So the depreciation will be calculate against $50,040.

Recovery period/Useful life is 5 years

so the calculation of depreciation in double declining method is double of straight line depreciation. So the percent will be 20%

Below are the calculations:

1st year ($50,040*20%)= $10,008 the value of the asset after 1st year is ($50,040-$10,008)=$40,032

2nd year ($40,032*20%)= $8,006 the value of the asset after 2nd year is ($40,032-$8,006)=$32,026

3rd year ($32,026*20%)= $6,405 the value of the asset after 3rd year is ($32,026-$6,405)=$25,620

4th year ($25,620*20%)= $5,124 the value of the asset after 4th year is ($25,620-$5,124)=$20,496

5th year ($20,496*20%)= $4,099 the value of the asset after 3rd year is ($20496-$4,099)=$16,397

So after 5 year the book value of the asset will be $16,397

and the 5 year total depreciation will be ($10,008+ $8,006+$6,405+$5,124+$4,099)=$33,642