Question

Seven-year property costing $75,000 was placed in service on July 7 of the current year. The...

Seven-year property costing $75,000 was placed in service on July 7 of the current year. The property has no salvage value and is depreciated using straight-line. Assuming the company elects not to take advantage of either bonus depreciation or the Code Sec. 179 deduction and the mid-quarter convention applies to all seven-year property placed in service this year, what will be depreciation expense with regard to this property for the current year?

Group of answer choices

$10,714

$4,018

$5,357

None of the above

PS: I answered with the $5,357 answer and it was wrong. I hope you could explain this question to me. Thank you

Business   Accounting   
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Answer #1

If the mid-quarter convention applies, the first-year depreciation for all property placed in service during the year is based on the number of quarters that the asset was in service. Property placed in service at any time during a quarter is treated as having been placed in service in the middle of the quarter.

Since the property is in service on July 7, it is treated as it is in service in the middle of the quarter. So, we take 1.5 quarter's depreciation.

Depreciation = (75000 / 7) * 1.5 / 4

= 4018

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