Question

Data, Inc., purchased and placed in service $5,000 of office furniture on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing and bonus depreciation were not elected. Using the excerpt of the MACRS half-year convention table below, what is the MACRS depreciation in year 3 for the office furniture?

Recovery Period5-Year7-Year10-Year120%14.29%10%232%24.49%18%319.2%17.49%14.4%
If required, round your answer to the nearest dollar.
a.$500
b.$715
c.$875
d.$1,000

Answer 1

The MACRS depreciation for office furniture with a cost of $5,000 using the half-year convention and a 5-Year recovery period at 20% for the first year is $1,000 for year 3.

Step-by-step explanation:

The student has asked for the calculation of MACRS depreciation for office furniture acquired by Data, Inc., under the Modified Accelerated Cost Recovery System (MACRS) using the half-year convention without electing Section 179 expensing or bonus depreciation. Given that office furniture generally falls under a 5-Year recovery period and the percentage for the first year under this category is 20% according to the half-year convention, we multiply the cost of the furniture by the first-year depreciation rate.

Depreciation expense for year 3:

$5,000 x 20% = $1,000

Therefore, the MACRS depreciation in year 3 for the office furniture is $1,000, which corresponds to option (d).