Question
Please help and advise, Harry Corp. is a technology start-up currently in its second year of operations. The company didnt purchase any assets this year
Please help and advise,
Harry Corp. is a technology start-up currently in its second year of operations. The company didnt purchase any assets this year but purchased the following assets in the prior year:
Placed in | |||
Asset | Service | Basis | |
Office equipment | August 14 | $ | 10,000 |
Manufacturing equipment | April 15 | 68,000 | |
Computer system | June 1 | 16,000 | |
Total | $ | 94,000 | |
|
Harry did not know depreciation was tax-deductible until it hired an accountant this year and didnt claim any depreciation deduction in its first year of operation. (Use MACRS Table 1 and Table 2.) (Round your intermediate dollar calculations and final answer to the nearest whole dollar amount. Leave no answer blank.)
a. What is the maximum amount of depreciation deduction Harry Corp. can deduct in its second year of operation?
Depreciation Deductible _____________?
b. What is the basis of the office equipment at the end of the second year?
Basic office equipment _______________?
Table 1 MACRS Half-Year Convention
Depreciation Rate for Recovery Period | ||||||
---|---|---|---|---|---|---|
3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year | |
Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
Year 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
Year 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
Year 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
Year 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
Year 9 | 6.56 | 5.91 | 4.462 | |||
Year 10 | 6.55 | 5.90 | 4.461 | |||
Year 11 | 3.28 | 5.91 | 4.462 | |||
Year 12 | 5.90 | 4.461 | ||||
Year 13 | 5.91 | 4.462 | ||||
Year 14 | 5.90 | 4.461 | ||||
Year 15 | 5.91 | 4.462 | ||||
Year 16 | 2.95 | 4.461 | ||||
Year 17 | 4.462 | |||||
Year 18 | 4.461 | |||||
Year 19 | 4.462 | |||||
Year 20 | 4.461 | |||||
Year 21 | 2.231 |
TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 35.00% | 25.00% |
Year 2 | 26.00 | 21.43 |
Year 3 | 15.60 | 15.31 |
Year 4 | 11.01 | 10.93 |
Year 5 | 11.01 | 8.75 |
Year 6 | 1.38 | 8.74 |
Year 7 | 8.75 | |
Year 8 | 1.09 |
TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 25.00% | 17.85% |
Year 2 | 30.00 | 23.47 |
Year 3 | 18.00 | 16.76 |
Year 4 | 11.37 | 11.97 |
Year 5 | 11.37 | 8.87 |
Year 6 | 4.26 | 8.87 |
Year 7 | 8.87 | |
Year 8 | 3.34 |
TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 15.00% | 10.71% |
Year 2 | 34.00 | 25.51 |
Year 3 | 20.40 | 18.22 |
Year 4 | 12.24 | 13.02 |
Year 5 | 11.30 | 9.30 |
Year 6 | 7.06 | 8.85 |
Year 7 | 8.86 | |
Year 8 | 5.53 |
TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 5.00% | 3.57% |
Year 2 | 38.00 | 27.55 |
Year 3 | 22.80 | 19.68 |
Year 4 | 13.68 | 14.06 |
Year 5 | 10.94 | 10.04 |
Year 6 | 9.58 | 8.73 |
Year 7 | 8.73 | |
Year 8 | 7.64 |
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