Evergreen Corporation (calendar-year-end) acquired the following assets during t

Question

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.)

*The delivery truck is not a luxury automobile.

a. What is the allowable MACRS depreciation on Evergreen’s property in the current year?

b. What would be the allowable MACRS depreciation on Evergreen’s property in the current year if the machinery had a basis of $170,000 rather than $70,000?

Date Placed Original Asset in Service Basis Machinery October 25 $ 70,000 Computer equipment February 3 10,000 Used delivery truck* August 17 23,000 Furniture April 22 150,000

Explanation / Answer

Machinery (7 year)

Oct-25

$70,000

14.29%

$10,003

b)

Machinery (7 year)

Oct-25

$170,000

3.57%

$6,069

$ 39,794, under the mid quarter convention, as computed above. Evergreen is required to use the mid quarter convention because greater than 40 percent of tangible personal property was placed in service during the 4th quarter. Evergreen placed 48.2% [$170,000 / ($10,000 + $23,000 + $150,000 + $170,000)] of its tangible personal property in service during the 4th quarter.

a) Placed in Original Asset Service Basis Rate Depreciation (a) (b) (a)*(b)

Machinery (7 year)

Oct-25

$70,000

14.29%

$10,003

Computer equipment (5 year) Feb-03 $10,000 20.00% $2,000 Used delivery truck (5 year) Aug-17 $23,000 20.00% $4,600 Furniture (7 year) Apr-22 $150,000 14.29% $21,435 Total $ 2,53,000 $38,038

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