Question

Question 6 O out of 2 points On November 10 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1.300,000; 15% was allocated to the basis of the land and the remaining 85% was allocated to the basis of the building. Using MACRS, what is Javier's depreciation expense on the building for year 2? Selected Answer: [None Given) Question 7 O out of 2 points On March 25 of year 1 Javier purchased an apartment building, including the land it was on. The total cost of the purchase was $1,300,000; 10% was allocated to the basis of the land and the remaining 90% was allocated to the basis of the building. Using MACRS, what is Javier's depreciation expense on the building for year 3? Selected Answer: [None Given)

Answer 1

6) Classification of Building = 39-year property (Non-residential real property) Convention = Mid-month convention Depreciation method = Straight Line method Asset first placed in use = November 10 of Year 1 Original Basis = 1,300,000 * 85% = $1,105,000 Year Depreciation rate 1 (100/39)*(1.5/12) = 0.3205% 2 (100/39)*(12/12) = 2.5641% 1 2 Depreciation expense on the building for year 2 = Original basis * Depreciation rate 7 = 1,105,000 * 2.5641% 5 = $28,333.33 5

7) Classification of Building = 27.50 year property (Residential real property) Convention = Mid-month convention Depreciation method = Straight Line method Asset first placed in use = March 25 of Year 1 Original Basis = 1,300,000 * 90% = $1,170,000 Year 1 Depreciation rate (100/27.50)*(9.5/12) = 2.8788% (100/27.50)*(12/12) = 3.6364% (100/27.50)*(12/12) = 3.6364% w N Depreciation expense on the building for year 3 = Original basis * Depreciation rate = 1,170,000 * 3.6364% = $42,545.45