Question

Orange Corporation acquired new office furniture on August 15, 2018, for $130,000. Orange does not elect immediate expensing under § 179. Orange claims any available additional first-year depreciation. If required, round your answer to the nearest dollar.

a. Determine Orange's cost recovery for 2018
The office furniture is classified as a seven-year class of property for MACRS. If bonus depreciation is elected, Orange's deduction is
b. Determine Orange's cost recovery for 2018 if Orange decided to only use $52,000 of bonus depreciation and normal MACRS on the balance of the acquisition cost.

Answer 1

Step-by-step explanation:

a) The asset is purchased in 2018.

In 2018, bonus depreciation % has been increased from 50% to 100%. If bonus depreciation is elected Orange Corporation can deduct 100% of Purchase cost of $130,000.

The office furniture is classified as seven year class of property for MACRs. If bonus depreciation is elected Orange's deduction is $130,000

= $130,000

b) if Orange decides to use only $52,000 of bonus depreciation, it can claim depreciation (MACRS) on balance amount of acquisition cost.

Cost Recovery for 2018:

Bonus depreciation = $52,000

MACRS Depreciation [($130,000 - $52,000) * 14.29%]= $11,146.20

Hence, Cost Recovery for 2018 = Bonus depreciation + MACRS Depreciation

= $52,000 + $11,146.20

= $63,146 (rounded off to nearest dollar)