Question

A calendar year-end business purchased a new delivery truck at the end of March during the current year. The truck was the only asset purchased during the year. Which of the following statements is correct regarding the depreciation that can be taken on the truck?

a. The truck cannot be depreciated.
b. The truck can be depreciated for a full year.
c. The truck can be depreciated for the portion of the year it was in service.
d. The truck must be depreciated using the straight-line method.

Answer 1

The delivery truck can be depreciated for the portion of the year it was in service, and there is no mandate to use the straight-line method for depreciation.

Step-by-step explanation:

A calendar year-end business purchased a new delivery truck at the end of March during the current year. Regarding the depreciation that can be taken on the truck, the correct statement is that the truck can be depreciated for the portion of the year it was in service. This is due to the fact that depreciation for tax purposes generally begins when an asset is placed in service and continues over its useful life. The Internal Revenue Service uses the Modified Accelerated Cost Recovery System (MACRS), which allows partial year depreciation in the first and last years based on the number of months the asset was in service. Therefore, the truck cannot be depreciated for a full year because it was not in use for the entire year, and there is no requirement to use the straight-line method, although it is one of the permitted depreciation methods.