a. $38,038, under the half year convention, calculated as follows: (1) Placed in Original (2) (1) x (2) Asset Service Basis Rate Depreciation Computer equipment (5 year) February 3 $10,000 20.00% $2,000 Furniture (7 year) April 22 $150,000 14.29% $21,435 Used delivery truck (5 year) August 17 $23,000 20.00% $4,600 Machinery (7 year) October 25 $70,000 14.29% $10,003 $253,000 $38,038 Evergreen isn’t required to use the mid-quarter convention because only 27.67% of its tangible personal property was placed in service during the 4th quarter (70,000/253,000). Additionally, the delivery truck is not considered to be a luxury auto b. $39,794, the mid-quarter convention, as computed below. Evergreen is required to use the mid-quarter convention because greater than 40 percent of tangible personal property was placed in service during the 4th quarter. Evergreen placed 48.2% [$170,000 / ($10,000 + $23,000 + $150,000 + $170,000)] of its tangible personal property in service during the 4th quarter. (1) Original (2) (1) x (2) Asset Placed in Service Quarter Rate Depreciation 1st Computer equipment (5 year) February 3 $10,000 35.00% $3,500 2nd Furniture (7 year) 22 $150,000 17.85% $26,775 3rd Used delivery truck (5 year) August 17 $23,000 15.00% $3,450 4th Machinery (7 year) October 25 $170,000 3.57% $6,069 Total $353,000 $39,794 [LO 2] Convers Corporation (June 30 year-end) acquired the following assets during the current tax year (ignore §179 expense and bonus depreciation for this problem): Placed in Original Asset Service Date Basis Machinery October 25 $70,000 Computer Equipment February 3 $10,000 Used Delivery Truck* 17 $23,000 Furniture 22 $150,000 Total $253,000 *The delivery truck is not a luxury automobile. What is the allowable MACRS depreciation on Convers’ property in the current year?
a. $38,038, under the half year convention, calculated as follows: Asset Placed in Service (1) Original Basis (2) Rate (1) x (2) Depreciation Computer equipment (5 year) February 3 $10,000 20.00% $2,000 Furniture (7 year) April 22 $150,000 14.29% $21,435 Used delivery truck (5 year) August 17 $23,000 20.00% $4,600 Machinery (7 year) October 25 $70,000 14.29% $10,003 $253,000 $38,038 Evergreen isn’t required to use the mid-quarter convention because only 27.67% of its tangible personal property was placed in service during the 4th quarter (70,000/253,000). Additionally, the delivery truck is not considered to be a luxury auto b. $39,794, the mid-quarter convention, as computed below. Evergreen is required to use the mid-quarter convention because greater than 40 percent of tangible personal property was placed in service during the 4th quarter. Evergreen placed 48.2% [$170,000 / ($10,000 + $23,000 + $150,000 + $170,000)] of its tangible personal property in service during the 4th quarter. Asset Placed in Service Quarter (1) Original (2) Rate (1) x (2) Depreciation Computer equipment (5 year) February 3 1st $10,000 35.00% $3,500 Furniture (7 year) 22 2nd $150,000 17.85% $26,775 Used delivery truck (5 year) August 17 3rd $23,000 15.00% $3,450 Machinery (7 year) October 25 4th $170,000 3.57% $6,069 Total $353,000 $39,794 [LO 2] Convers Corporation (June 30 year-end) acquired the following assets during the current tax year (ignore §179 expense and bonus depreciation for this problem): Asset Placed in Service Date Original Basis Machinery October 25 $70,000 Computer Equipment February 3 $10,000 Used Delivery Truck* 17 $23,000 Furniture 22 $150,000 Total $253,000 *The delivery truck is not a luxury automobile. What is the allowable MACRS depreciation on Convers’ property in the current year?
Solution-Manual-for-Taxation-of-Business-Entities-6th-Edition-by-Spilker.docx