Question

In: Accounting

Mary purchased an apartment building on March 12, 2017, for a total of $3 million of...

Mary purchased an apartment building on March 12, 2017, for a total of $3 million of which $600,000 was the value of the land on which the apartment building was located.

Also, Mary purchased 7-year class new business equipment for $45,000 on November 11, 2017. She elects not to immediately expense the equipment under §179 and elects not to take the additional first-year depreciation.

Mary purchased no other business assets during 2017.

Determine Mary’s depreciation on the apartment building for 2017.

b. Determine Mary’s depreciation on the equipment for 2017.

c. If Mary sells the apartment building on April 29, 2020, how much depreciation deduction will Mary take for the apartment building for 2020?

d. If Mary sells the equipment on December 20, 2018, how much depreciation deduction will Mary take for the equipment for 2018?

Solutions

Expert Solution

A) Depreciation on the apartment building for 2017

Assumption: LIfe of Apartment is 20 Years & Company following Starightline Method of Depreciation.

Value of Building= $3 Million - 0.6 Million = $2.4 Million

Depreciation = 2.4/20*295/365= $96986

Depreciation Period= 12th March 2017 till 31st December 2017= 295 Days

B) Depreciation on the equipment for 2017.

Depreciation Period = 11th November to 31st Deecember= 51days

45000/7*51/365= $898

C) Depreciation on Apartment Building for 2020

Depreciation period = 1st Jan 2020 to 29th April 2020= 120 Days

Closing Book Value for 2017

Depreciation = 2.4/20*295/365= $96986

2400000-96986= $2303014/230.5 months*12= $119896 Depreciation for 2018

Closing Value for 2018= 2303014-119896= $2183118

Depreciation for 2019

2183118/218.5 months*12 Months= $119896

Closing Value for 2019= 2183118-119896= $2063222

Depreciation for 2020

2063222/206.5 months* 4 months= $39966

D) Depreciation for 2018 for Equipment

Depreciation Period = 11th November to 31st Deecember= 51days

45000/7*51/365= $898 2017 Depreciation

Closing Value for 2017

45000-898= $44102

Depreciation for 2018

44102/82 months *12 months/365*355 days= $6277

ekkarill92 answered 10 months ago

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