Solar Systems purchased two assets during the current year. On August 10, Solar Systems placed in service computer equipment (five year property) with a basis of $20,000 and on November 18 placed in service machinery (seven-year property) with a basis of $10,000. Calculate the maximum depreciation expense, ignoring Sect. 179 and bonus depreciation). Use your book's table 1. Type of asset Date in service Recovery period Cost basis Depreciation rate Depreciation expense Adjusted tax basis Year Computer equipment 8/10/Y1 5 year 20,000 Y1 Machinery 11/18/Y1 7 year 10,000 Y1
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Solar Systems purchased two assets during the current year. On August 10, Solar Systems placed in service computer equipment (five year property) with a basis of $20,000 and on November 18 placed in service machinery (seven-year property) with a basis of $10,000. Calculate the maximum
| Type of asset | Date in service | Recovery period | Cost basis | Depreciation rate | Depreciation expense | Adjusted tax basis | Year |
| Computer equipment | 8/10/Y1 | 5 year | 20,000 | Y1 | |||
| Machinery | 11/18/Y1 | 7 year | 10,000 | Y1 |
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