Chapter 17.II, Problem 1RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Ink Masters Printing purchased a new printing press for $660,000 on February 9.2010. The press is used for business 90% of the time. As the accountant for the company, you elected to lake a $100,000 Section 179 deduction. The press also qualified for a special depreciation allowance. (Sec Table 17-4.)

a. What was the basis for depreciation of the printing press?

Business-use basis =

Tentative basis = 594.000 - 100,000 = $494.000

The asset qualifies for a 50% special depreciation allowance (Table 17-4).

Basis for depreciation = 494.000 (100% -50%) = $247,000

b. What was the amount of the third year's depreciation using MACRS?

Printing presses are in the 7-year property class (Table 17-1).

Third-year depreciation = 17.49% (Table 17-2)

**(a)**

To determine

**To calculate:** The basis for depreciation of Ink Master’s printing press using MACRS when the new printing press purchased cost is

Explanation

**Given Information:**

The new printing press purchased by Ink Masters Printing is

**Formula used:**

The steps to calculate basis for depreciation by MACRS method are as follows:

Step 1: a. Calculate the Business-use basis by multiplying business-use percentage of the asset by the original cost as:

Step 1: b. Calculate the tentative basis by subtracting Section 179 deduction from the Business-use basis as:

Step 1: c. Calculate the basis of depreciation by the following formula.

**Calculation:**

Consider the new printing press purchased by Ink Masters Printing is

The Business-use basis is:

Now, using the above formula, the Business-use basis is:

**(b)**

To determine

**To calculate:** The amount of the third years’ depreciation of Ink Master’s printing press using MACRS when the new printing press purchased cost is

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