Question

1) Hazel purchased a used business asset (five-year property) on March 10, 2017 at a cost of $80,000. She did not elect to expense any of the assets under Section 179 or 1^st year bonus depreciation. Hazel sold the asset on January 20, 2019. Determine the depreciation deduction for 2019.   

2) Barry purchased a business asset (five-year property) on November 30, 2018 at a cost of $100,000. This is the only asset he purchased during the year. Barry did not elect to expense any of the assets under Section 179 or 1^st year bonus depreciation. Barry sold the assets on May 17, 2019. Determine the depreciation for 2019.

*Please show all the work on how to get to the answers as I am having a hard time understanding how to figure this out.

Answer 1

1. Assuming that the financial year is from 1st january to 31st december

Hazel can depreciate the asset by $16000($80000/5) for 5 year under straight line depreciation method

In the year 2019 asset is only used for less than 180days, hence only 50% of the depreciation can be expensed

Therefore,

Depreciation expense for the year 2019= $16000*50% =$8000

2. Barry can depreciate the asset by $20000($100000/5) for 5 year under straight line depreciation method

In the year 2018 only 50% of the depreciation can be expensed because the asset is put to use for less than 180 days, balance 50% can be expensed in the year 2019.

In the year 2019 asset is only used for less than 180days, hence only 50% of the depreciation can be expensed

Depreciation expense for the year 2019= $16000*50%+$16000*50%= $16000