Penguin Network Warehouses, LLC ("PNW, LLC") is a start-up warehousing and logistics company providing grocery stores with climate-controlled storage and just-in-time delivery of perishable goods nationwide. PNW, LLC has 10 Regional Offices with the Corporate Headquarters being in Region 5, Chicago. Each Regional Office makes tangible personal property purchases based on the needs of each location and performs the data entry exercise of entering the purchase information into a central system for fixed asset tracking and depreciation purposes.

Corporate has negotiated bulk pricing arrangements with its primary suppliers. Each Regional Office purchases the similar tangible personal property from three primary suppliers as follows:

Gentoo Refrigeration supplier of commercial cooling machinery and equipment Magellanic Resources supplier of computers and peripheral equipment used to manage logistics Emperor Office Furniture supplier of office furniture and fixtures

Ms. Humboldt, the Corporate Tax Analyst, has exported the data from the central system and has created the following Tableau visualization.

Regional Office: Atlanta

Region: 4

MACRS Year 1:

0.14290

Purchase Amount: 10,485,091

Tax Depreciation Year 1: $1,498,320

Regional Office: Boston

Region: 1

MACRS Year 1:

0.14290

Purchase Amount: 10,295,947

Tax Depreciation Year 1: $1,471,291

Regional Office: Chicago

Region: 5

MACRS Year 1:

0.14290

Purchase Amount: 10,248,765

Tax Depreciation Year 1: $1,464,549

Regional Office: Dallas

Region: 6

MACRS Year 1:

0.14290

Purchase Amount: 10,422,943

Tax Depreciation Year 1: $1,489,439

Regional Office: Denver

Region: 8

MACRS Year 1:

0.14290

Purchase Amount: 8,948,276

Tax Depreciation Year 1: $1,278,709

Regional Office: Kansas City

Region: 7

MACRS Year 1:

0.14290

Purchase Amount: 10,949,647

Tax Depreciation Year 1: $1,564,705

Regional Office: New York City

Region: 2

MACRS Year 1:

0.14290

Purchase Amount: 9,728,141

Tax Depreciation Year 1: $1,390,151

Regional Office: Philadelphia

Region: 3

MACRS Year 1:

0.14290

Purchase Amount: 9,818,445

Tax Depreciation Year 1: $1,403,056

Regional Office: San Francisco

Region: 9

MACRS Year 1:

0.14290

Purchase Amount: 10,280,850

Tax Depreciation Year 1: $1,469,133

Regional Office: Seattle

Region: 10

MACRS Year 1:

0.14290

Purchase Amount: 9,365,069

Tax Depreciation Year 1: $1,338,268

As typical of a start-up business, PNW, LLC expects to generate a current year loss with regular deprecation. As such, PNW, LLC does not elect Section 179 depreciation and elects out of bonus depreciation. PNW, LLC qualifies for the half year convention.

Required:

1. How much depreciation is reported by Philadelphia Region 3 on assets purchased from Magellanic Resources?
   1. Depreciation = ?
2. How much depreciation is reported by Kansas City Region 7 on assets purchased from Magellanic Resources?
   1. Depreciation = ?
3. What asset class life was used by Kansas City Region 7 on assets purchased from Magellanic Resources?
   1. 3 years, 5 years, 7 years or 10 years
4. Did Kansas City Region 7 under or over report depreciation on assets purchased from Magellanic Resources?
   1. Over or Under
5. What is the correct depreciation for Kansas City Region 7 on assets purchased from Magellanic Resources?
   1. Depreciation = ?

Penguin Network Warehouses, LLC MACRS Depreciation Year 1 Supplier Emperor Office Furnit.. Gentoo Refrigeration Magellanic Resources Regional Office $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 MACRS Tax Depreciation Year 1 $1,000,000 $800,000 Regional Office Atlanta Boston Chicago Dallas Denver Kansas City New York City Philadelphia San Francisco Seattle $600,000 $400,000 $200,000 $0 Atlanta Boston Chicago Dallas Denver Kansas City Philadelphia Seattle New York City San Francisco Penguin Network Warehouses, LLC MACRS Depreciation Year 1 Supplier Emperor Office Furnit.. Gentoo Refrigeration Magellanic Resources Regional Office $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 MACRS Tax Depreciation Year 1 $1,000,000 $800,000 Regional Office Atlanta Boston Chicago Dallas Denver Kansas City New York City Philadelphia San Francisco Seattle $600,000 $400,000 $200,000 $0 Atlanta Boston Chicago Dallas Denver Kansas City Philadelphia Seattle New York City San Francisco