Question

Part A Way Corporation disposed of the following tangible personal property assets in the current year Date Date Sold 5/12/13 7/15/19 Original Basis $ 55,000 Acquired Asset Convention Furniture (7-year) Machinery (7-year) Delivery truck* (5- year) Machinery (7-year) 10/11/17 8/11/19 Computer (5-year) HY 3/23/14 3/15/19 мо 72,000 9/17/16 3/13/19 HY 20,000 250,000 80,000 мO HY 2/11/1912/15/19 *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2019 depreciation expense (Way has not used §179 expense and bonus depreciation in past years and elects not to do so this year as well). Be sure to show your work if you want any partial credit. Part B Two years ago, Bethesda Corporation bought a delivery truck for $30,000 (not subject to the luxury auto depreciation limits). Bethesda used MACRS 200 percent declining balance and the half-year convention to recover the cost of the truck, but it did not elect $179 expensing or eligible bonus depreciation. Answer the questions for the following alternative scenarios. a. Assuming Bethesda used the truck until it sold it in March of year 3, what depreciation expense can it claim on the truck for years 1 through 3? b. Assume that Bethesda claimed $18,500 of depreciation expense on the truck before it sold it in year 3. What is the amount and character of the gain or loss if Bethesda sold the truck in year 3 for $17,000, and incurred $2,000 of selling expenses on the sale?

Answer 1

ponse. PART 4 Asset original Quarter Rate 1 Portion of year Depreciation | Basis I'midquarter & Furniture $55,000 - 8.93% so %. $2456 Machinery $72,000 1st quarter / 10.93% 12.5% 8984 Delivery $20,000 - (19.2% 50%. $1920 Machinery $250,000 wol mortes At 62.5% $43,047 27.554 - Computer & $89000 - than 1 50%. $0 * nodeprociation for assets acquired in the same year truck and disposed Total Depreciation Expense $48,407 PART-B.. Given: Delivery truck bought for $30,000. (2) Calculation of depreciation expense for years I through 25 Year original Bosis (a) Rate (6) Depreciation (axb). $30,000 20%. $ 6000 $30,000 $9.600 $30,000 19 . 2 1/2 $9880 - Total Depreciation expense | 18,480 (6) Calculation of gain or loss on the trucks - Giveni Accumulated depreciation = $18,500 hotel Selling Price = $17,000 bleus selling expenses = ($2000) I Metselling price $15,000 - Original basis > $30,000.
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So, §1231 gain Particulars Amount (6). Original Boss 30,000 den? Accumulated depreciation (18,500) - Adjusted bam . 1,500 Tusc netselling price (note 1) I (15,000) Gain/dow) $3500 Gain $1245 depreciation encakture - 18,500 (os) 35oo which - e., 43500, ever is lower o, 81231 gain > 3500 - 3500 $0 . (c) J. (Notez)? Ginen Selling price = 35,000. hend selling expenser (2000) Net selling price = $32,000 7 Particulars Imount (4) Original Bans 30,000 Lent Accumulated depreciation (18,500) - Adjusted bars. 11,5oo dent not selling price (3 2000) - Gain/dow. $ 20,500 Gain - & 1245 depreciation descapture a huser of accumulated depreciation of Gain, ley deses o 18,500 8 20,500 ie; =$18,000 » & 1231 gain is 20,500 -18,500 => $2000

Amount (6) selling price = 7000 Lend selling esipenses = aroo) Notselling price $5ooo Particulars . Original bans S0000 seu Acumulated deprociation (18,500) - Adjusted bans 11,500 Lend selling price (5000) Gain/don 1 (6500) Los So, the dois of $6500 is to be beared by the company over the year.