Question

In: Accounting

Lina purchased a new car for use in her business during 2019. The auto was the...

Lina purchased a new car for use in her business during 2019. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2019 and 2020 (Lina doesn’t want to take bonus depreciation for 2019 or 2020) in the following alternative scenarios (assuming half-year convention for all

a. The vehicle cost $32,800 and business use is 100 percent (ignore §179 expense).

b. The vehicle cost $84,000, and business use is 100 percent.

c. The vehicle cost $84,000, and she used it 80 percent for business.

d. The vehicle cost $84,000, and she used it 80 percent for business. She sold it on March 1 of year 2.

e. The vehicle cost $84,000, and she used it 20 percent for business.

f. The vehicle cost $84,000, and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Solutions

Expert Solution

Answer (a) The vehicle cost $328000 and business use is 100 percent (ignore §179 expense). Original basis of auto in 2019 as per the given problem - $32800. Original basis of auto in 2020 as per the given problem - $15,000. Assuming half-year convention for all MACRS depreciation in 2019 (@ 20% of $32800) - $6560  MACRS depreciation in 2020 (@ 32% of $32800) - $10496 Maximum auto depreciation for year 2019 as per luxury auto limits - $3,060 Maximum auto depreciation for year 2020 as per luxury auto limits - $4,900 From MACRS depreciation and Maximum auto depreciation calculated above for each year, the lower value of the two calculations gives us the depreciation expense for that particular year. Therefore, the depreciation expense for year 2019 is $3060. Similarly, the depreciation expense for the year 2020 is $4,800.

(b) The vehicle cost $84000, and business use is 100 percent. Original basis of auto in 2019 as per the given problem - $84000. Original basis of auto in 2020 as per the given problem - $40,000. Assuming half-year convention for all MACRS depreciation in 2019 (@ 20% of $84000) - $16800 MACRS depreciation in 2020 (@ 32% of $84000) - $26880 Maximum auto depreciation for year 2019 as per luxury auto limits- $3,060 Maximum auto depreciation for year 2020 as per luxury auto limits - $4,900 From MACRS depreciation and Maximum auto depreciation calculated above for each year, the lower value of the two calculations gives us the depreciation expense for that particular year. Therefore, the depreciation expense for year 2019 is $8000. Similarly, the depreciation expense for the year 2020 is $12800


Related Solutions

Lina purchased a new car for use in her business during 2019. The auto was the...
Lina purchased a new car for use in her business during 2019. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2019 and 2020 (Lina doesn’t want to take bonus depreciation for 2019 or 2020) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) 1.The vehicle...
Lina purchased a new car for use in her business during 2019. The auto was the...
Lina purchased a new car for use in her business during 2019. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2019 and 2020 (Lina doesn’t want to take bonus depreciation for 2019 or 2020) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) b. The...
Lina purchased a new car for use in her business during 2019. The auto was the...
Lina purchased a new car for use in her business during 2019. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2019 and 2020 (Lina doesn’t want to take bonus depreciation for 2019 or 2020) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) The vehicle...
[The following information applies to the questions displayed below.] Lina purchased a new car for use...
[The following information applies to the questions displayed below.] Lina purchased a new car for use in her business during 2020. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2020 and 2021 (Lina doesn’t want to take bonus depreciation for 2020 or 2021) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS...
Lina Martinez wants to buy a new high-end audio system for her car. The system is...
Lina Martinez wants to buy a new high-end audio system for her car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Lina can buy the equipment from Dealer A, with no money down, by making payments of $175.83 a month for 12 months; she can buy the same equipment from Dealer B by making 36 monthly payments of $68.36 (again, with no money down). Lina is...
Required information [The following information applies to the questions displayed below.] Lina purchased a new car...
Required information [The following information applies to the questions displayed below.] Lina purchased a new car for use in her business during 2017. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2017 and 2018 (Lina doesn’t want to take bonus depreciation for 2017 or 2018) in the following alternative scenarios (assuming half-year convention for all)...
Deborah purchases a new $32,000 car in 2016 to use exclusively in her business. If Deborah...
Deborah purchases a new $32,000 car in 2016 to use exclusively in her business. If Deborah does not elect to expense but does take bonus depreciation in 2016 and holds the car until it is fully depreciated, how many years will this take? Please show your calculation:
Bob's Cars purchased a new car for use in its business on January 1, 2017. It...
Bob's Cars purchased a new car for use in its business on January 1, 2017. It paid $30,000 for the car. Charm expects the car to have a useful life of four years with an estimated residual value of zero. Charm expects to drive the car as follows Year 2017: 20,000 miles driven Year 2018: 45,000 miles driven Year 2019: 40,000 miles driven Year 2020: 15,000 miles driven Total Miles Driven: 120,000 miles 1. Using the straight-line method of depreciation,...
Problem 1-9A Lina Aragon started a new business and completed the following transactions during December Dec...
Problem 1-9A Lina Aragon started a new business and completed the following transactions during December Dec 1 Lina transferred $65,000 cash from a personal savings account to a checking account in the name      of Aragon Electric 2.  The company rented office space and paid $1,000 cash for December rent 3.  The company purchased $13,000 of electrical equipment by paying $4,800 cash and agreeing to                  To pay the $8,200 balance in 30 days. 5. The company purchased office supplies by...
Lina, a Malaysian citizen, is planning to expand her business of exporting Tupperware into Japan. Kenji,...
Lina, a Malaysian citizen, is planning to expand her business of exporting Tupperware into Japan. Kenji, a Japanese citizen, is very interested to be the distributor for Lina’s good. After nearly one week of negotiation, both of them had agreed for the goods to be delivered through maritime mode of transportation. However, Lina is worried about the payment method and the cost incurred by her if the goods were damaged while in transit. (a) discuss whether the use of bill...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT