Question

XYZ Inc. uses a June 30 fiscal year-end. In fiscal year 2019 (year ending June 30,...

XYZ Inc. uses a June 30 fiscal year-end. In fiscal year 2019 (year ending June 30, 2019), the company acquired two 3-year class assets shown below. What cost recovery deduction can XYZ Inc. take in fiscal year 2019? Assume XYZ does not elect to take Sec. 179 expense or bonus depreciation.

                                       Acquisition Date           Cost

            Asset 1             January 2019                $4,000

            Asset 2             May 2019                     $10,000

Business   Accounting   
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Answer #1

Solution:

Date Placed in Service Convention Type Asset Class Cost Rate Cost recovery
Jan-19 Mid Quarter [ Third Quarter] 3 Years $         4,000.00 25.00% $              1,000.00
May-19 Mid Quarter [ Fourth Quarter] 3 Years $      10,000.00 8.33% $                  833.00
Total $              1,833.00

Notes:

1) Mid Quarter Convention has been used because more than 40% of assets are acquired in Fourth quarter of fiscal year ended June 30.

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