Question

Mary-Jo owns a theater. She purchased a new computer to run the accounting software and lighting for the theater. The computer cost $2,000 and was purchased on May 4, 2020. It was the only equipment purchased by the theater for 2020. Using the MACRS system, how much is her depreciation deduction for 2020

Answer 1

The depreciation for 2020 is $233.33

Step-by-step explanation:

Under the MACRS, computer useful life is 5 years.

The depreciation rate for every year, applying double declining method is: 100% / 5 = 20%. So, depreciation expenses for first year of the computer is calculated as: Cost of the computer x 20% = = 2,000 x 20% = $400.

As the computer is purchased in May, the year 2020 would only account for 7 month out of the first year of depreciation. Thus 2020 depreciation expenses = First year depreciation x 7/12 = 400 x 7/12 = $233.33