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Denver Inc purchased a 5 year asset in November for $20,000. This is the only asset...

Denver Inc purchased a 5 year asset in November for $20,000. This is the only asset the company placed in service during that year. Neither the straight line method nor the 150% declining balance method was elected. The company elects out of bonus depreciation an the Section 179 expense deduction. Denver Inc sold the asset in September of Year 3. What is the depreciation in the year of sale? A. $2,350, B. $2,850, C. $3,250, D. $3,450

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Expert Solution

Answer is B $2850

calculation explained below

TABLE A-5 FOR 3 YEARS CLASS PROPERTY MID QUARTER Convention—Declining Balance is used
PLACE IN SERVICE IN LAST QUARTER
YEAR ASSET VALUE RATE OF DEPRECIATION AS PER TABLE A-15

AMOUNT OF DEPRECIATION
1 $          20,000 5 $                                             1,000
2 $          20,000 38 $                                             7,600
3 $          20,000 22.8 $                                             2,850
NOTE: DEPRECATION FOR THE YEAR OF SALE IS ADJUSTED TO 62.5% OF TOTAL DEPRECIATION
ADJUSTMENT FACTOR = (NO. OF QUARTER IN YEAR OF SALE INCLUDING QUARTER OF SALE-.5)/4
,=(3-.5)/4
0.625
OR 62.5%

ekkarill92 answered 4 months ago
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