Question

Problem 8-46 (Algorithmic) (LO. 4)

On March 1, 2017, Leo purchased and placed in service a new car that cost $25,700. The business use percentage for the car is always 100%. He does take the additional first-year depreciation. If required, round your answers to the nearest dollar. Click here to access the depreciation table of the textbook. Click here to access the limits for certain automobiles.

a. What MACRS convention applies to the new car?

b. Is the automobile considered "listed property"?

c. Leo's cost recovery deduction in 2017 is $ and for 2018 is $ .

Answer 1

Part A

Half year convention applies to the new car

Part B

Yes, the automobile is considered "listed property"

Part C

Deduction for 2017

Additional first-year depreciation ($25700 × 50%) = $12850

MACRS cost recovery [($25700 − $12850) × 20%]=2,570

Total cost recovery = 15420

But it is Limited to $11,160 ($3,160 + $8,000)$12,000

Deduction for 2018 ($25700 × 32%) = $8224 but it is limited to $5,100

So the deduction for 2017 = $11,160;

Deduction for 2014 = $5,100.