Mike purchases a new heavy-duty truck (5-year class recovery property) for his delivery service on March 30, 2019. No other assets were purchased during the year. The truck is not considered a passenger automobile for purposes of the listed property and luxury automobile limitations. The truck has a depreciable basis of $42,000 and an estimated useful life of 5 years. Assume half-year convention for tax. Assume half-year convention for tax.

Required:

a. Calculate the amount of depreciation for 2017 using financial accounting straight-line depreciation (not the straight-line MACRS election) over the truck's estimated useful life.
b. Calculate the amount of depreciation for 2017 using the straight-line depreciation election, using MACRS tables over the minimum number of years with no bonus depreciation or election to expense
c.Calculate the amount of depreciation for 2017, including bonus depreciation but no election to expense, that Mike could deduct using the MACRS tables
d. Assume no income limit on the expense election. Calculate the amount of depreciation for 2017 including bonus depreciation and the election to expense that Mike can deduct

Question

17-06-2020
Business

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Mike purchases a new heavy-duty truck (5-year class recovery property) for his delivery service on March 30, 2019. No other assets were purchased during the year. The truck is not considered a passenger automobile for purposes of the listed property and luxury automobile limitations. The truck has a depreciable basis of $42,000 and an estimated useful life of 5 years. Assume half-year convention for tax. Assume half-year convention for tax.

Required:

a. Calculate the amount of depreciation for 2017 using financial accounting straight-line depreciation (not the straight-line MACRS election) over the truck's estimated useful life.
b. Calculate the amount of depreciation for 2017 using the straight-line depreciation election, using MACRS tables over the minimum number of years with no bonus depreciation or election to expense
c.Calculate the amount of depreciation for 2017, including bonus depreciation but no election to expense, that Mike could deduct using the MACRS tables
d. Assume no income limit on the expense election. Calculate the amount of depreciation for 2017 including bonus depreciation and the election to expense that Mike can deduct

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jepessoa jepessoa · Answer 1 · 2020-06-19T06:22:42+02:00

Answer:

a. Calculate the amount of depreciation for 2017 using financial accounting straight-line depreciation (not the straight-line MACRS election) over the truck's estimated useful life.

depreciation expense per year = $42,000 / 5 = $8,400

depreciation expense for 2017 = $8,400 x 9/12 = $6,300

b. Calculate the amount of depreciation for 2017 using the straight-line depreciation election, using MACRS tables over the minimum number of years with no bonus depreciation or election to expense

using MACRS table, depreciation expense = $42,000 x (20%/2 due to half year) = $4,200

c. Calculate the amount of depreciation for 2017, including bonus depreciation but no election to expense, that Mike could deduct using the MACRS tables

= ($42,000 / 2) + $4,200 = $21,000 + $4,200 = $25,200

d. Assume no income limit on the expense election. Calculate the amount of depreciation for 2017 including bonus depreciation and the election to expense that Mike can deduct

$42,000