Question

Medium Corporation purchases furniture and fixtures for use in business and places in service on November 1, 2018. The furniture and fixtures cost $80,000 and represented Medium's only acquisition of depreciable property during the year. Medium does not elect to expense any part of the cost of the property under Sec.179.

a) What is Medium's depreciation deductions in 2018? Round the answers to the nearest dollar.

b) If Medium Corporation sells the furniture on August 1, 2020, what is the depreciation deduction for furniture in 2020?

Answer 1

a) Medium's depreciation deductions in 2018 :

given : The furniture and fixtures cost $80,000

depreciation = 80000/ useful life of the asset.

useful life of asset = 7

(Fixtures are Items that are part of a building, such as lighting and communication equipment that are not given a different recovery period, are considered seven-year property.)

therefore depreciation = 80000/7 = 11429 (using straight line method)

b) If Medium Corporation sells the furniture on August 1, 2020, depreciation deduction for furniture in 2020 : 11429 (using straight line method)

When an asset is sold, depreciation expense must be computed up to the sale date to adjust the asset to its current book value. Compare the cash proceeds received from the sale with the asset's book value to determine if a gain or loss on disposal has been realized.