Question

QUESTION 5 DLW Corporation acquired and placed in service the following assets during the year: Asset Cost Basis Computer equipment Furniture Commercial building Date Acquired 2/17 5/12 $10,000 $16,000 $270,000 1171 Assuming DLW does not elect 5179 expensing and elects not to use bonus depreciation, what is DLW's year 3 cost recovery for each asset if DLW sells all of these assets on 1/23 of year 3?

Answer 1

Question 5:- What is DLW's year 3 cost recovery for each assets if DLW sells all of these assets on 1/23 of year 3?

Solution:- The cost recovery for Year 3 under half year convention of personal property is $2,647

Claculation of DLW's year 3 Cost recovery of each assets:-

Assets Original Basis Computer Equipment $10,000 Furniture $16,000 Building $270,000 Total depreciation or cost recovered Round off Recovery Period Rate Portion of the year Depreciation Calculations 5 19.20% 50% $960 (10,000 * 19.20% * 50%) 7 17.49% 50% $1399.20 (16,000 * 17.49% * 50%) 39 2.56% 4.17% $288 (270,000 * 2.56% * 4.17%) $2647.20 $2647

Year 3: Portion of depreciation is (1-0.5) / 12 months * 100% = 4.17%

Note:- 50% is taken as portion of year under half year convention of personal property.

           Rates are calculated according to MARS table.

           Computer, office equipment has 5 years life

           Office furniture,farm machinery has 7 years life.

           Non residential real estate has 39 years life.

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