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a) Calculate total accumulative depreciation of each asset until the sold Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset.

a) Calculate total accumulative depreciation of each asset until the sold Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter7: Fixed Assets, Natural Resources, And Intangible Assets
Section: Chapter Questions
Problem 7.2.2MBA
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2nd note: Assume there is no Section 179 and bonus depreciation. Use MACRS only for depreciation. Andrea owns a small company that producing facial masks. Thanks to COVID-19, her business was booming at the beginning of 2020. But by end of 2020, since the need for facial masks is no longer there, Andrea decided to close her business. The first step to close her business involve selling off business assets. Below are her assets transaction info Assets Purchased Cost Sold date Sold price Date Delivery car 7/1/20 2/14/19 12/31/20 12/31/20 12/31/20 25k 15k Furniture Equipment 20k 10k 2/1/19 Warehouse 1/1/19 1/1/19 100k 20k 12/31/20 12/31/20 50k 55k Land 150k 200k a) Calculate total accumulative depreciation of each asset until the sold date (12/31/20). Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset. d) Point out the exact character of gain/loss for each asset gain/loss (ex: Ordinary, pure 1231, 1245, 1250, etc.) e) Calculate the Net 1231 Gain/Loss Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules f) Characterize the gain from the whole 5 transactions into 2 categories: Total Ordinary Gain & Total LTCG
Transcribed Image Text:2nd note: Assume there is no Section 179 and bonus depreciation. Use MACRS only for depreciation. Andrea owns a small company that producing facial masks. Thanks to COVID-19, her business was booming at the beginning of 2020. But by end of 2020, since the need for facial masks is no longer there, Andrea decided to close her business. The first step to close her business involve selling off business assets. Below are her assets transaction info Assets Purchased Cost Sold date Sold price Date Delivery car 7/1/20 2/14/19 12/31/20 12/31/20 12/31/20 25k 15k Furniture Equipment 20k 10k 2/1/19 Warehouse 1/1/19 1/1/19 100k 20k 12/31/20 12/31/20 50k 55k Land 150k 200k a) Calculate total accumulative depreciation of each asset until the sold date (12/31/20). Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset. d) Point out the exact character of gain/loss for each asset gain/loss (ex: Ordinary, pure 1231, 1245, 1250, etc.) e) Calculate the Net 1231 Gain/Loss Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules f) Characterize the gain from the whole 5 transactions into 2 categories: Total Ordinary Gain & Total LTCG
Hint: From a ->d: Create tables and fill in the answer. A table can be similar as below: Depreciation Depreciation Acc. Total year 1 Adjusted Depreciation Basis Assets Purchased Cost Date year 2 Delivery car 7/1/20 2/14/19 2/1/19 1/1/19 1/1/19 25k Furniture Equipment 20k 100k Warehouse 50k Land 150k Assets Sold date Sold price Adjusted Gain/Loss Characters basis recognized Delivery car 12/31/20 Furniture Equipment Warehouse Land 15k 12/31/20 12/31/20 12/31/20 12/31/20 10k 20k 55k 200k
Transcribed Image Text:Hint: From a ->d: Create tables and fill in the answer. A table can be similar as below: Depreciation Depreciation Acc. Total year 1 Adjusted Depreciation Basis Assets Purchased Cost Date year 2 Delivery car 7/1/20 2/14/19 2/1/19 1/1/19 1/1/19 25k Furniture Equipment 20k 100k Warehouse 50k Land 150k Assets Sold date Sold price Adjusted Gain/Loss Characters basis recognized Delivery car 12/31/20 Furniture Equipment Warehouse Land 15k 12/31/20 12/31/20 12/31/20 12/31/20 10k 20k 55k 200k
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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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