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Comprehensive Problem 10-76 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5)

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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	Cost		Date Placed in Service
Office furniture	$	150,000	02/03/2019
Machinery		1,560,000	07/22/2019
Used delivery truck*		40,000	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	Cost		Date Placed in Service
Computers & info. system	$	400,000	03/31/2020
Luxury auto		80,000	05/26/2020
Assembly equipment		1,200,000	08/15/2020
Storage building		700,000	11/13/2020

Used 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 Cost $179 Expense MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction Office furniture $ 0 0 Machinery Delivery truck Total 2019 Cost Recovery o 0 $ 0 $ 0 $ 0 $ 0 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 Office furniture $ 0 $ 150,000 $ 1,560,000 40,000 150,000 $ 540,000 Machinery Used delivery truck 0 36,735 $ 132,246 12,800 36,735 132,246 12,800 0 40,000 2020 Assets 0 80,000 400,000 80,000 0 Computers & Info. System Luxury Auto Assembly Equipment Storage Building 400,000 80,000 1,200,000 700,000 80,000 3,160 22,864 2,247 3,160 1,062,864 1,040,000 160,000 0 700,000 2,247 Total 2020 Cost Recovery $ 4,130,000 $ 1,040,000 $ 2,070,000 290,052 $ 1,330,052 c. Compute the maximum 2020 depreciation deductions, including $179 expense, but now assume that Karane would like to take bonus depreciation. Description Cost Sec. 179 Expense Bonus MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction 2019 Assets Office Furniture 150,000 1,560,000 40,000 0 0 Machinery Used Delivery Truck O 2020 Assets 400,000 0 O Computers & Info. System Luxury Auto Assembly Equipment Storage Building 0 O Total 2020 Cost Recovery $ 2,150,000 $ 0 $ 0 0 $ 0 0