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I:10-38 Luxury Auto Limitations. In 2020, Luby Corporation acquires and places into service an automobile that...

I:10-38 Luxury Auto Limitations. In 2020, Luby Corporation acquires and places into service an automobile that it uses only for business purposes. Luby does not claim Sec. 179 expensing or bonus depreciation for the vehicle. Compute Luby’s depreciation deduction for 2020 and each subsequent year. Assume the half-year convention applies.

  1. Luby purchases the automobile for $68,000.
  2. Luby purchases the automobile for $48,000.
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Answer #1

the useful life of a automobile is 5 years but since it is a half convection depreciation method which accumes that asset is acquired in the middle of the year ., automobile will be depreciated in 6 years.

a) cost of automobile is $68000. dep in first year= $68000/5=$13600/2=$6800 so in 2020- $6800, 2021-$13600 , 2022-$13600, 2023-$13600. 2024-$13600,2025-$6800.

b) caot of automobile-$48000/5=9600/2=$4800. so in 2020-$4800, 2021-$9600, 2022-$9600, 2023-$9600,2024-$9600.,2025-$4800

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