Question

Axl purchased and placed in service the following fixed assets for his business:

Furniture & fixtures (new) costing $21,000 on February 15, 2016

Computer equipment (new) costing $5,000 on February 10, 2016

Furniture & fixtures (used) costing $2,000 on November 1, 2016

Office building costing $200,000 on October 3, 2016

Axl has decided not to elect the immediate expensing under §179 but will take the additional first-year bonus depreciation where available.

Show depreciation calculation.

Answer 1

AXL opted not to take section 179 deduction benefit, however he is open for first year bonus depreciation. Calculation for each of the assets is as follows:

Furniture & fixtures (new) costing $21,000 on February 15, 2016

Cost of the Asset = $21,000

Less : 50% First year bonus depreciation 10,500

$10,500

Less: 20% Standard Depreciation

(20% * 10,500) $2,100

Computer equipment (new) costing $5,000 on February 10, 2016

Cost of the Asset = $5,000

Less : 50% First year bonus depreciation    2,500

$2,500

Less: 20% Standard Depreciation

(20% * 2,500)   $1,000

Depreciation for the first year = $2,500 + $1,000 = $3,500

Furniture & fixtures (used) costing $2,000 on November 1, 2016

Cost of the Asset = $2,000

Less : 50% First year bonus depreciation    1,000

$1,000

Less: 20% Standard Depreciation

(20% * 1,000)   $200

Depreciation for the first year = $1,00 + $200 = $1,200

Office building costing $200,000 on October 3, 2016

Cost of the Asset = $200,000

Less : 50% First year bonus depreciation    100,000

$100,000

Less: 20% Standard Depreciation

(20% * 100,000)   $20,000

Depreciation for the first year = $100,000 + $20,000 = $120,000