Question

1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is...

1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is the only asset she placed in service during the year. Her net income for the year is $2,000,000.

  1. What is her depreciation deduction for 2020 if makes no elections and uses MACRS?
  2. What is her depreciation deduction for 2020 if she elects Additional First Year (Bonus) depreciation?
  3. Which method would you recommend for her?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER

a.The depreciation deduction for 2020 if she elects Section 179 -

1st year write-offs:
Section 179 Deduction: $

1040000

Total Deduction in first year(Without

100% bonus Depreciation):

 $ 1040000

b.The depreciation deduction for 2020 if makes no elections and uses MACRS -

Depreciation for 2020 is 500000$

Year Adjusted Basis % Depreciation Cumulative Book Value Method
2020 $2500000 20%    5,00,000.00    5,00,000.00 $2000000 DB
2021 $2000000 32%    8,00,000.00 13,00,000.00 $1200000 DB
2022 $1200000 19.20%    4,80,000.00 17,80,000.00 $720000 DB
2023 $720000 11.52%    2,88,000.00 20,68,000.00 $432000 SL
2024 $432000 11.52%    2,88,000.00 23,56,000.00 $144000 SL
2025 $144000 5.76%    1,44,000.00 25,00,000.00 $0 SL

c.Depreciation deduction for 2020 if she elects Additional First Year (Bonus) depreciation -

Section 179 Deduction: $

1040000
100% Bonus Depreciation: $

1460000
Total Deduction in first year: $

2500000

d. Decision making.

1)If option (a) is choosen-

Net taxable Income = 2000000 -1040000 = $960000

2)

If option (b) is choosen-

Net taxable Income for 2020 = 2000000 - 500000 = $1500000

3)

If option (c) is choosen-

Net taxable Income for 2020 = 2000000 - 2000000 = "Nil"

Conclusion - If we want to claim 100% depreciation then its better to go option (c) .If we do not want to claim 100% depreciation then we should us Macrs method as it will allows us to depreciate machinery for 5 years over its life

================

DEAR STUDENT,

IF YOU HAVE ANY QUERY PLEASE ASK ME IN THE COMMENT BOX,I AM HERE TO HELP YOU.PLEASE GIVE ME POSITIVE RATING..

****************THANK YOU****************

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is...
1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is the only asset she placed in service during the year. Her net income for the year is $2,000,000. (7 POINTS) a. What is her depreciation deduction for 2020 if she elects Section 179? b. What is her depreciation deduction for 2020 if makes no elections and uses MACRS? c. What is her depreciation deduction for 2020 if she elects Additional First Year (Bonus) depreciation?...
1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is...
1. Hermione purchased and placed in service machine costing $2,500,000 in November of 2020. This is the only asset she placed in service during the year. Her net income for the year is $2,000,000.(7 Points) a. What is her depreciation deduction for 2020 if she elects Section 179? b. What is her depreciation deduction for 2020 if makes no elections and uses MACRS? c. What is her depreciation deduction for 2020 if she elects Additional First Year (Bonus) depreciation? d....
On January 31, 2020, you “placed in service” a new piece of equipment in your Schedule...
On January 31, 2020, you “placed in service” a new piece of equipment in your Schedule C widget-making business – namely, a brand new widget-making machine. It is the only depreciable asset you will place in service during all of 2020. You paid exactly $1,000,000 for the machine. You do not want “expensing” or “bonus” depreciation or any other fancy cost recovery, just regular MACRS. State exactly how much your 2020 MACRS deduction will be with respect to your new...
On July 1 of the current year, Jeremiah Company purchased and placed into service factory machinery...
On July 1 of the current year, Jeremiah Company purchased and placed into service factory machinery to be used in its operations.  The machinery cost $150,000 and qualifies as 7-year MACRS property.  The machines were the only assets placed into service during the year.  Jeremiah elects to expense the maximum under bonus depreciation and nothing under Section 179.  The company’s taxable income before any deduction related to the machines is $80,000.  Assume the depreciation table percentages are 14.29% for Year 1 and 24.49% for Year...
On November 16, 2018, Ace Company purchased manufacturing equipment (7-year property) for 2,400,000 and computers and...
On November 16, 2018, Ace Company purchased manufacturing equipment (7-year property) for 2,400,000 and computers and duplication machines (5-year property) for 250,000. Ace elects not tot take bonus depreciation on these assets but wants to take Section 179 expensing and MACRS depreciation instead. These assets are the only asset purchases that Ace makes during all of 2018. Compute Ace’s Section 179 expense deduction and its MACRS depreciation deduction for these assets in 2018 assuming that any expensing is used first...
On April 5, 2018, Mary purchased and placed in service, new seven-year class assets costing $540,000...
On April 5, 2018, Mary purchased and placed in service, new seven-year class assets costing $540,000 and five-year class assets costing $140,000. Both assets were placed in service on April 5, 2018. She elects to expense the maximum amount under § 179. She does take additional first-year depreciation. Assume taxable income is not a limitation. Determine Mary’s maximum cost recovery with respect to the assets for 2018.
On June 5, 2019, Javier Sanchez purchased and placed in service a new 7-year class asset...
On June 5, 2019, Javier Sanchez purchased and placed in service a new 7-year class asset costing $560,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). During 2019, his business generated a net income of $945,780 before any $179 immediate expense election. Rather than using bonus depreciation, Javier would like to use $179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. If...
1.Chunwei acquired and placed in service $1,250,000 of equipment on August 1, 2018 for use in...
1.Chunwei acquired and placed in service $1,250,000 of equipment on August 1, 2018 for use in her sole proprietorship. The equipment is 5-year recovery property. No other acquisitions are made during the year. Chunwei elects to expense the maximum amount under Sec. 179, and bonus depreciation is not applied. Chunwei's total deductions for 2018 (including Sec. 179 and depreciation) are A) $1,233,000. B) $233,000. C) $1,165,000. D) $1,033,000. 2. Ahmed purchases and places in service in 2018 personal property costing...
A) Johnson, LLC only purchased one asset this year. Johnson, LLC placed in service on July...
A) Johnson, LLC only purchased one asset this year. Johnson, LLC placed in service on July 19, 2019, machinery and equipment (seven-year property) with a basis of $1,330,000. Assume that Johnson, LLC has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction, including §179 expensing (but ignoring bonus depreciation). (Use MACRS Table 1.)
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT