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Juan, a sole proprietor, acquires a new 5-year class asset on March 14, 2017, for $200,000....

Juan, a sole proprietor, acquires a new 5-year class asset on March 14, 2017, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. Juan does not claim any available additional first-year depreciation.

A. Determine Juan's cost recovery for 2017 $

B. On January 15, 2019, Juan sells the asset. Determine Juan's cost recovery for 2019 $

C. Suppose Juan sold the asset on December 15, 2019. His cost recovery for 2019 would be $

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Answer #1

Under cost recovery method until the cost element relating to the sale is paid in cash by the customer.

as and when the sellers cost is recovered csh receipts are recorded as income

Purchase of asset - march 14, 2017 - $200,000

A. According to this method Juan's cost recovery for 2017 is nil since the amount is not recovered

B. As on January 15, 2019 Juan cost recovery is (200000/5)*2= 80000

C. If the asset is sold on December 15, 2019, Juan shall record as cost revovery an amount equal to 120000 being the book value of the asset equal to profit earned.

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