Question

Store Here inc acquired a warehouse and land this year for $350,000. Of these $350,000, $75,000...

Store Here inc acquired a warehouse and land this year for $350,000. Of these $350,000, $75,000 was allocated to the land and $275,000 to the warehouse. Store Here began using the property of august 22. How much is Stores Here's max depreciation this year? (use the appropiate MACRS table in your textbook)

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Answer #1

Under MACRS -MOdified Accelerated Cost Recovery System,

Which alloes a stated recovery period that is generally shorter than the asset's estimated useful life

The recovery period is identical for new/used property and salvage value is ignored and land cost is deducted.

-Under General depreciation system in MACRS

# for real estate properties like warehouse, office buildings, 39yr, straight line metod is used.

# Mid monnth convention is taken ie on ehalf of the month in which the property is purchased or disposed is taken

For the given problem

land and wareouse= $350,000

Warehouse cost= $275,000

Identifying the applicable MACRS factor using the MACRS depreciation table

=$275,000*1.605% ( as per MACRS Table)- taken as in the month the asset is put to use

=$4,413.75

Calculation

=$275,000*1/39*4.5/12

=$2,644.23

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