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Required information Comprehensive Problem 10-76 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5) [The following information applies to the questions displayed below. Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2019. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2019: Asset Office furniture Machinery Used delivery truck* Cost $ 150,000 1,560,000 40,000 Date Placed in Service 02/03/2019 07/22/2019 08/17/2019 *Not considered a luxury automobile. During 2019, Karane was very successful and had no $179 limitations) and decided to acquire more assets in 2020 to increase its production capacity. These are the assets acquired during 2020: Asset Computers & info. system Luxury autof Assembly equipment Storage building Cost $ 400,000 80,000 1,200,000 700,000 Date Placed in Service 03/31/2020 05/26/2020 08/15/2020 11/13/2020 tUsed 100% for business purposes. Karane generated taxable income in 2020 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.) Comprehensive Problem 10-76 Part a a. Compute the maximum 2019 depreciation deductions, including $179 expense (ignoring bonus depreciation). Description Office furniture Current Total Cost Cost $179 Expense MACRS Basis MACRS Recovery Depreciation Deduction $ 150,000 $ 0 $ 150,000 $ 21,435 $ 21,435 1,560,000 1,000,000 560,000 137,144 1,137,144 40,000 0 40,000 8,000 8,000 $ 1,750,000 $ 1,000,000 $ 750,000 $ 166,579 $ 1,166,579 Machinery Delivery truck Total 2019 Cost Recovery b. Compute the maximum 2020 depreciation deductions, including $179 expense (ignoring bonus depreciation). Description Cost Sec. 179 Expense MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction 2019 Assets $ $ 0 Office furniture Machinery Used delivery truck 150,000 1,560,000 40,000 0 0 2020 Assets o 0 Computers & Info. System Luxury Auto Assembly Equipment Storage Building 400,000 80,000 1,200,000 700,000 0 O Total 2020 Cost Recovery 4,130,000 $ 0 $ 0 $ 0 $ 0 c. Compute the maximum 2020 depreciation deductions, including $179 expense, but now assume that Karane would like to take bonus depreciation as well. Description Cost Sec. 179 Expense Bonus MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction 2019 Assets Office Furniture $ o 0 Machinery Used Delivery Truck O 2020 Assets 0 0 Computers & Info. System Luxury Auto Assembly Equipment Storage Building o O Total 2020 Cost Recovery $ 0 $ 0 $ O $ O $ 0 $ 0 d. Now assume that during 2020, Karane decides to buy a competitor's assets for a purchase price of $1,350,000. Compute the maximum 2020 cost recovery, including $179 expense and bonus depreciation. Karane purchased the following assets for the lump sum purchase price: (Round your final answers to the nearest whole dollar amount.) Asset Inventory Office furniture Machinery Patent Goodwill Building Land Cost $220,000 230,000 250,000 198,000 2,000 430,000 20,000 Date Placed in Service 09/15/2020 09/15/2020 09/15/2020 09/15/2020 09/15/2020 09/15/2020 09/15/2020 Description Cost Sec. 179 Expense Bonus MACRS Basis Current MACRS Depreciation Current Amortization Total Cost Recovery Deduction $ 0 2019 Assets Office Furniture Machinery Used Delivery Truck 0 0 0 2020 Assets Computers & Info. System Luxury Auto Assembly Equipment Storage Building 0 0 0 Inventory Office Furniture 0 Machinery 0 Patent 0 Goodwill 0 Building 0 Land 0 Totals 0 $ 0 $ 0 $ O $ 0 $ 0 $ O
