Chapter 17.II, Problem 2RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Trident Developers purchased a computer system for $75,000 on April 27. 2014. The computer system is used for business 100%- of the time. The accountant for the company elected to take a $10,000 Section 179 deduction, and the asset qualified for a special depreciation allowance. (see Table 17-4)

Certain Qualified Asset Placed into Service | Special Allowance |

September 11, 2001 -May 5. 2003 | 30% |

May 6, 2003-January 1, 2005 | 50% |

December 31, 2007-January 1, 2015 | 50% |

a. What was the basis for depreciation of the computer system?

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

**(a)**

To determine

**To calculate:** The basis for depreciation of Trident Developer’s computer system using MACRS when the new computer system purchased cost is

Explanation

**Given Information:**

The new computer system purchased by Trident Developers is for

**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 computer system purchased by Trident Developers is for

The Business-use basis is:

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

**(b)**

To determine

**To calculate:** The amount of the first years’ depreciation of Trident Developer’s computer system using MACRS when the new computer system purchased cost is

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