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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Stone Age Concrete, Inc.MACRS Depreciation ScheduleCement Manufacturing Equipment
End ofYear Original Basis (cost) Cost Recovery Percentage Cost Recovery (depreciation) AccumulatedDepreciation BookValue
1 _____ _____ _____ _____ (new)_____
2 _____ _____ _____ _____ _____
3 _____ _____ _____ _____ _____
4 _____ _____ _____ _____ _____
5 _____ _____ _____ _____ _____

(a)

To determine

To calculate: The basis for depreciation of cement manufacturing equipment valued at $420,000 on March 14,2014 of Stone Age Concrete, Inc. The equipment is used for business 100% of the time and firm’s accountant elected to take a $100,000 section 179 deduction.

Explanation

Given Information:

Stone Age Concrete, Inc. purchased cement manufacturing equipment valued at $420,000 on March 14, 2014. The equipment is used for business 100% of the time. The firm’s accountant elected to take a $100,000 section 179 deduction.

Formula used:

Procedure to prepare a Depreciation schedule by using MACRS is given below.

First, calculate the basis for depreciation.

Step 1: Percent of business use: If an asset is used for business less than 100% of the time, then multiply the original cost by the business-use percentage of the asset.

Business-use basis=Original cost×Business-use percentage

Step 2: Section 179 deduction: Find the amount of section 179 deduction by subtracting from a business-use basis.

Tentative basis=Business-use basisSection 179 deduction

Step 3: Special depreciation allowances: Find Special depreciation allowances percent with the help of Table 17-4.

Basis for depreciation=Tentative basis(100%Special depreciation allowance percent)

Calculation:

To calculate the basis for depreciation steps are given below

(b)

To determine

To calculate: A depreciation schedule for the first five years of operation of cement manufacturing equipment with the help of MACRS.

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