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ACCT 323 – September 2015 – Homework #5

1. Janey purchased machinery on April 8th of the current year. The relevant costs

for the year are as follows: machinery for \$10,000, \$800 shipping, \$50 for delivery

insurance, \$500 for installation, \$750 for sales tax, \$150 for the annual tune up, and

\$200 of property taxes (an annual tax on business property). What is Janey’s tax

basis for the machinery?

2. Yasmin purchased two assets during the current year. Yasmin placed in service

computer equipment (5-year property) on May 26th with a basis of \$10,000 and

machinery (7-year property) on December 9th with a basis of \$10,000. Calculate the

maximum depreciation expense (ignoring §179 and bonus depreciation).

3. Bonnie Jo used two assets during the current year. The first was computer

equipment with an original basis of \$15,000, currently in the second year of

depreciation, and under the half-year convention. This asset was disposed of on

October 1st of the current year. The second was furniture with an original basis of

\$24,000 placed in service during the first quarter, currently in the fourth year of

depreciation, and under the mid-quarter convention. What is Bonnie Jo’s

depreciation expense for the current year, rounded to the nearest whole number?

4. Timothy purchased a new computer for his consulting practice on October

15th of the current year. The basis of the computer was \$4,000. During the

Thanksgiving holiday, he decided the computer didn’t meet his business needs and

gave it to his college-aged son in another state. The computer was never used for

depreciation. What is Timothy’s total cost recovery expense with respect to the

computer during the current year?

5. During April of the current year, Ronen purchased a warehouse that he used

for business purposes. The basis was \$1,600,000. Calculate the maximum

depreciation expense during the current year?

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Use the Resources available to you in completing your answers. See, for example,

Roger CPA Review Modules 6.01, 8.02 & 6.03.

Also the IRS has posted a video/webinar entitled, “Depreciation Basics”, which can

be viewed at http://www.irsvideos.gov/DepreciationBasics.