DLW Corporation acquired and placed in service the following
assets during the year:
| Date | Cost | ||
| Asset | Acquired | Basis | |
| Computer equipment |
3/11 | $ | 18,000 |
| Furniture | 3/7 | 23,500 | |
| Commercial building | 9/15 | 317,000 | |
Assuming DLW does not elect §179 expensing or bonus
depreciation, answer the following questions: (Use MACRS Table 1,
Table 2, Table 3, Table 4 and Table 5.) (Do not round
intermediate calculations. Round your final answers to the nearest
whole dollar amount.)
A.)What is DLW's year 1 cost recovery for each
asset?
| Asset | Yr1 Recovery Cost |
| Computer Equipment | |
| Furniture | |
| Commercial Building | |
| Total |
B.) What is DLW's year 3 cost recovery for each asset if DLW
sells all of these assets on 2/24 of year 3?
| Assets | Yr 3 Recovery Costs |
| Computer Equipment | |
| Furniture | |
| Commercial Building | |
| Total |
Answer
Solution:
A).
Calculation of DLW's year 1 cost recovery for each
asset:
Under half-year convention for personal property,
calculated as follows:
| Asset | Purchases date | Quarter | Recovery period | Original basis (1) | Rate (2) |
Depreciation
(1) * (2) |
| Computer equipment | March,11th | 1st quarter | 5 years | $18,000 | 20.00% | $3,600 |
| Furniture | March, 7th | 1st quarter | 7 years | $23,500 | 14.29% | $3,358 |
| Commercial Building | September, 15th | 3rd quarter | 39 years | $317,000 | 0.749% | $2,374 |
| Total | $9,332 |
Therefore, the year 1 cost recovery is for each
asset is $9,332
B)
Calculation of DLW's year 3 cost recovery for each asset if DLW
sells all of these assets on 2/24 of year
3:
| Asset | Original basis | Recovery period | Rate | Portion of year | Depreciation and Expense |
| Computer equipment | $18,000 | 5 years | 19.20% | 50.00% | $1,728 |
| Furniture | $23,500 | 7 years | 17.49% | 50.00% | $2,055 |
| Commercial building | $317,000 | 39 years | 2.564% | 12.5% | $1,015 |
| Total | $4,798 |
Therefore, the year 3 cost
recovery is for each asset is $4,798
