Question

Andre acquired a computer on march 3, 2017, for $2,800. he elects the straight-line method for cost recovery. andre does not elect immediate expensing under § 179. he does not claim any available additional first-year depreciation.

Answer 1

US GAAP allows computers to be depreciated using the straight line method for useful life periods ranging from 3 to 5 years. Depending on the useful life we select, the cost recovery per year will vary:

useful life 5 years useful life 3 years

2017* = $2,800 / (5/2) = $280 = $2,800 / (3/2) = $467

2018 = $2,800 / 5 = $560 = $2,800 / 3 = $933

2019 = $2,800 / 5 = $560 = $2,800 / 3 = $933

2020 = $2,800 / 5 = $560 = $2,800 / (3/2) = $467

2021 = $2,800 / 5 = $560

2022 = $2,800 / (5/2) = $280

total recovery $2,800 $2,800

*Since the purchase was made on March, we can recover only half year during 2017

Answer 2

His cost recovery deduction for the computer is $for 2018 and $ for 2019. For 2018: $2,800 x 10% (Exhibit 8.5) = $280. For 2019: $2,800 x 20% (Exhibit 8.5) = $560