Question

Bonnie Jo purchased a used computer (5-year property) for use in her sole proprietorship. The basis of the computer was $2,400. Bonnie Jo used the computer in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation expense during the first year assuming the sole proprietorship had a loss during the year (Bonnie did not place the property in service in the last quarter):

A. $240
B. $288
C. $480
D. $2,400
E. None of these

Answer 1

To calculate Bonnie Jo's depreciation expense for the first year, you need to determine the depreciable basis of the computer and apply the appropriate depreciation method. The depreciation expense for the first year can be calculated by multiplying the depreciable basis by the business use percentage.

Step-by-step explanation:

To calculate Bonnie Jo's depreciation expense for the first year, we need to determine the depreciable basis of the computer and apply the appropriate depreciation method. Since the computer is a 5-year property, it will depreciate over a period of 5 years. However, since Bonnie Jo used the computer for business purposes only 60% of the time, we will multiply the depreciable basis by that percentage. The depreciation expense for the first year can be calculated as follows:

1. Depreciable Basis = $2,400
2. Business Use Percentage: 60%
3. Depreciation Expense = Depreciable Basis * Business Use Percentage

Depreciation Expense = $2,400 * 0.6 = $1,440

Therefore, the correct answer is D. $1,440.