Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sam Johnson started a small machine shop, Machines, Inc., in his garage and incorporated it in March of 2013 as a calendar-year corporation. At that

Sam Johnson started a small machine shop, Machines, Inc., in his garage and incorporated it in March of 2013 as a calendar-year corporation. At that time, he began using his personal computer and tools solely for the business as part of his contribution to the corporation. The computer cost $2,700 but had a fair market value of only $900 at conversion and the tools, which had cost $1,500, were valued at $1,100. During 2013, Machines, Inc. purchased two machines: Machine A, purchased on May 2, cost $24,000; Machine B, purchased on June 5, cost $40,000. The corporation expensed Machine A under Section 179. The computer, tools, and Machine B were depreciated using accelerated MACRS only. The corporation did not take any depreciation on the garage nor did Sam charge the business rent because the business moved to a building the business purchased for $125,000 on January 5, 2014. On January 20, 2014, Machines purchased $4,000 of office furniture and on July 7, it purchased Machine C for $48,000. It depreciated these assets under MACRS (including allowable bonus depreciation), but did not use Section 179 expensing. Machines acquired no new assets in 2015. On February 4, 2016, Machines bought a new computer system for $5,100. It sold the old computer the same day for $300. On March 15, it sold Machine A for $6,000 and purchased a more versatile machine for $58,000. On August 15, Machines sold bonds it had purchased with $9,800 of the cash Sam had originally contributed to the corporation for $10,400 to pay creditors. The business takes only the maximum allowable MACRS depreciation deduction on assets purchased in 2016 with no Section 179 expensing or bonus depreciation. Determine Machines, Inc.'s depreciation expense deductions for 2013 through 2016. Determine the realized and recognized gains or losses on the property transactions in 2016.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Sector Accounting And Auditing In EuropeThe Challenge Of Harmonization

Authors: I. Brusca, E. Caperchione, S. Cohen, F Manes Rossi

3rd Edition

1137461330, 9781137461339

More Books

Students also viewed these Accounting questions

Question

The role of the G7 and G20 in fostering globalization

Answered: 1 week ago